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TMI Blog2022 (2) TMI 1349X X X X Extracts X X X X X X X X Extracts X X X X ..... ving due opportunity of being heard to the assessee before passing the assessment order. 02. Assessee is aggrieved with the revisionary order and therefore has raised following grounds of appeal: - "On the facts and circumstances of the case and in law:- 1. The Ld PCIT-1, Mumbai erred in holding that the assessment order passed by the AO on 21.12.2016 was erroneous in so far as prejudicial to the interest of revenue. 2. The Ld PCIT failed to appreciate that the AO has passed the order following the specific direction of PCIT-4, Kolkata and the PCIT nowhere could found that the AO has failed to follow any direction given by the PCIT-4, Kolkata. 3. The Ld. PCIT-1, Mumbai grossly erred and inter alia reviewing the order of his predecessor PCIT-4, Kolkata in garb of section 263 order which is illegal & beyond his jurisdiction. 4. The Ld. PCIT failed to appreciate that AO has not only carried out detailed inquiries as per law but also carried our verification by obtaining reply of 133(6) notice and recording statement u/s 131 and verifying the identity, genuineness and creditworthiness of the investor companies and the satisfaction of the AO is also apparently appearing i ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... tice under section 142 (1) of the act was issued and 16/11/2011. Thereafter the hearing took place on several dates. On 28/11/2011 the assessment order under section 147 read with section 143 (3) of the act was passed. In the above order, the total income offered in the return of income of Rs. 31,898/- was assessed at Rs. 101,900. iii. Thereafter, on examination of the records of the assessee, the Commissioner of income tax Kolkata- II, Calcutta issued notice under section 263 of the income tax act on 3/2/2014 questioning that why the order passed under section 148 of the act dated 28/11/2011 be not held to be an order erroneous and prejudicial to the interest of the revenue because the balance sheet of the assessee company shows a share capital of Rs. 45.34 crores in the result of Rs. 44.43 crores and the learned assessing officer has not carried out requisite and proper enquiries regarding the identity, creditworthiness of the shareholders and genuineness of the transaction and therefore the impugned order was passed mechanically, without application of mind which rendered the assessment order erroneous and prejudicial to the interest of revenue. iv. In response to this, the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ce issued to the shareholders, AO did not make any further attempt to serve those notices upon the shareholders. The notices were replied in some of the case is under section 133 (6) but the AO did not bother to examine those notices or to mention these in assessment order. (2) the AO issued summons under section 131 to the directors of the assessee company, some of the summons were unserved and returned back, the learned assessing officer did not make mention in the assessment order about the replies received in response of two summons. (3) The learned assessing officer has completed the assessment proceedings without examining the details and documents available in the record the AO did not look into the site of the Ministry of corporate affairs to obtain the latest address of the assessee company and its directors. The AO did not serve any notices under section 133 (6) of the act to the shareholders of the assessee company or the entity was served. The learned AO also did not look at the replies received. The assessment order reveals that the confirmations from the various parties were received which are available in the assessment order but no verification of these documents ap ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ed under section 131 of the act along with the books of accounts and other relevant documents of the investor companies. The notices under section 133 (6) were also issued to the investor companies, the submissions were received which was verified and checked. The source of fund, identity, genuineness and creditworthiness were found in order after verification. The source of fund was also verified and found an order. Accordingly the assessment order under section 143 (3)/263/144/263/147/143 (3) was passed on 21/12/2016 in which the original addition made of Rs. 473,550,000/- made in the assessment order dated 2/3/2015 was not made. x. Subsequently on examination of the record, the learned principal Commissioner of income tax - 4, Calcutta issued notice under section 263 of the act on 19/2/2019 stating that assessment order passed under section 143 (3)/263/144/263/147/143 (3) dated 21/12/2016 for the impugned assessment year i.e. 2010 - 11 is erroneous and prejudicial to the interest of the revenue for vii reasons and therefore the show cause notice was issued. xi. On 13/3/2019 passed the order under section 263 of the income tax act 1961 (revisionary order number 3) holding tha ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 18 and 1/3/2018 and more this notices were not served on the assessee. Therefore, the learned PCIT passed an order without giving adequate opportunity to the assessee. The coordinate bench by order dated 24/12/2019 restored the matter back to the file of the learned PCIT for de novo adjudication after giving sufficient opportunity of being heard to the assessee. xiii. Therefore, pursuant to the order of the coordinate bench, the assessee was issued notice under section 263 of the income tax act, which was replied by letter dated 25/2/2022. The assesse submitted several details before the learned PCIT. It was stated that the proceedings may be dropped in view of the earlier order of assessment, revisionary order, the details submitted by the assessee, summons issued by the learned assessing officer, reply given by the investor, statement given by the directors of the investor company, exhaustive detail submitted before the learned assessing officer with respect to the identity, creditworthiness of the investor as well as the genuineness of the transaction. Therefore, there is a complete verification of the details several times by the lower authorities. It was further submitted th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... re us. 05. The learned authorized representative submitted i. Written submission made before the learned principal Commissioner of income tax on 11/3/2022. He further referred the chart showing the name of the subscriber of share capital, number of shares subscribed, total amount of contribution of share capital and networks of the subscriber of the share capital to prove that the subscriber of the share capital were having sufficient creditworthiness. He further referred to the name of the subscribers of the share capital along with the list of shell companies notified by the government to prove that none of the subscriber of the share capital has ever been termed as a shell company. He further submitted that the summons issued under section 131 by the learned assessing officer obtained from the respective subscriber during the course of assessment proceedings following the direction of the earlier revisionary orders stating that all those summons were responded to by their respective investor. He further referred to the copies of replies filed by the subscribers in response to notice issued under section 133 (6) during the course of assessment proceedings on several occasions. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e submitted before the lower authorities, they were properly investigated, those parties are properly replied, based on this the learned assessing officer once made the assessment and did not make the addition, itself shows that there is nothing left out to be enquired by the learned assessing officer. iii. He further submitted that if the learned PCIT was so sure on all four occasions that the addition should have been made, there are empowered under section 263 of the income tax act to make the addition itself. However, on all four occasions no additions were made by the learned PCIT. iv. He further stated that once the learned assessing officer has made the addition of Rs. 45 crores in the hence of the assessee. That order cannot be held to be erroneous or prejudicial to the interest of the revenue. When the addition has been made completely of the share capital receipt by the assessee is nothing else was required to be made. Therefore holding that order where the learned assessing officer has made the complete addition cannot be held to be prejudicial to the interest of revenue. For making a revision, the learned PCIT is required to satisfy that when condition of the orde ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... come tax if active the learned assessing officer had made reasonable enquiries. He further submitted that the order under section 263 of the act could not be passed to conduct further enquiries. viii. In the end he relied upon the decision of the coordinate bench in case of Narayanan Rane 70 taxmann.com 227 to support that the explanation 2 (A) to section 263 does not authorize or give unfettered powers to the Commissioner to revise each and every order, if in his opinion, same has not been passed without making inquiries verification which should have been made. ix. He further referred to the decision of the coordinate bench in case of JRD Tata trust versus deputy Commissioner of income tax (2020) 122 taxmann.com 275 wherein it has been held that test for finding out whether the explanation 2 to section 263 has been rightly invoked or not is not simply existence of the view professed by the Commissioner about lack of necessary enquiries and verification but an objective finding that assessing officer has not conducted, at stage of passing order which is subject to revision proceedings, inquiries and verification is expected, in ordinary course of performance of duties of a pru ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... sultancy fees was made. Order us/ 263 of The Act can be passed within two years from the end of the financial year in which order sought to be revised is passed. Therefore the LD PCIT has powers only to revises those issues on which the order u/s 147 is passed. For the other income there is no assessment made. If any other view is taken that will give powers to LD PCIT to revises any income in case of reassessment cases, which is even, not part of reassessment. Therefore firstly in this case there is no assessment as the ROI was accepted u/s 143 (1) as case was not picked up for scrutiny and ROI was accepted as it is. Therefore, in such cases there is no assessment. Further, in case of reassessment, PCIT has only power to revise those issues based on which reassessment is made. In this case the issues of share capital was neither in reason recorded or assessed, and nor the original assessment is made. Therefore, not all revisionary orders passed are sustainable. He relied up on CIT V Lakshmi Vilas Bank Ltd.* [2023] 146 taxmann.com 227 (Madras) and CIT v. Alagendran Finance Ltd. [2007] 162 Taxman 465/293 ITR 1 (SC). 06. The learned departmental representative vehemently supported t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... out that and asked to produce them. The show cause notice was issued that why the above amount of share application money is/share capital/sale premium should not be added under section 68 of the act. The assessee did not comply with that. The AO identified the directors of each of the company analyzed their financial worth, looked at the capacity of the company to invest, the income stream of the investor company and thereafter reached at a conclusion that (1) there is no business activity of the company, (2) almost entire amount of share application money received by the assessee has been invested into the shares of other companies, (3) assessee company do not have any worth except the investment in shares of other companies, (4) assessee company do not have any reputation in the market which could fetch such huge share premium at such a high rate, (5) assessee company do not have any future prospects for which one could invest in the shares of the assessee company or such a high share premium. Accordingly, the addition of Rs. 473,550,000 was made under section 68 of the income tax act. 09. The most surprising aspect of the case is the order passed under section 263 of the incom ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... invoking the provisions of section 263 of the act are self-evident. 010. Another interesting part of the case is that the order under section 263 of the act was passed on 19/10/2016; the AO completed the assessment order in pursuance to that order on 21/12/2016. He issues notices under section 142 (1) on 15/11/2016. In between this that is almost within a period of one month, the summons were issued under section 131 of the act of all the parties, notices under section 133 (6) were also issued to the investor companies. Summons were responded to by the investors and notices under section 133 (6) were also responded to favourably. The AO takes a view that there is no addition under section 68 could be made in the hence of the assessee with respect to the share capital and premium of Rs. 47 crores. Thereafter the learned AO held by the order passed under section 143 (3) read with section 263 read with section 144 read with section 263 read with section 147 and read with section 143 (3) of the act that the addition of Rs. 47 crores made by the learned assessing officer in the earlier order is not correct. Therefore, in this order he deleted the addition completely. With alarming spee ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 294 (SC)/[2021] 282 Taxman 464 (SC) [2021] 130 taxmann.com 293 (Guj.) It is held that "5 The Tribunal has found that in the order passed by the PCIT, Explanation 2 of section 263 of the Act, 1961 is made applicable. The Tribunal observed that the PCIT has not mentioned in the show cause notice to invoke the Explanation 2 of section 263 of the Act 1961. Therefore, by invocation of Explanation in the order without confronting the assessee and giving an opportunity of being heard to the assessee is not appropriate and sustainable in law. 6 Thus, the Tribunal has considered in detail the aspect of revisional power to be exercised by the PCIT in the facts of the case and has given a finding of facts that the Assessing Officer has made inquiries in detail and after applying mind, accepted the genuineness of loans received by the respondent assessee from the aforesaid two companies and such view of the Assessing Officer is a plausible view, and therefore, the same cannot be said to be erroneous or prejudicial to the interest of the Revenue." 015. The assessee is also supported by the decision of the coordinate bench in case of 70 taxmann.com 227 wherein it has been held that to invoke ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... second time deleting the addition on the same set of facts. Thus, it cannot be said that the view taken by the AO is not sustainable. Thus, the revision is barred in such cases. 017. With respect to the limitation period, we reject the argument of the assessee in view of the decision of the honourable Calcutta High Court on identical facts and circumstances of the case in [2017] 80 taxmann.com 262 (Calcutta) as under :- "8. On the first question suggested by him, submission of Mr. Agarwal is that the Commissioner ought to have confined his decision, while exercising power under Section 263 of the Act, only to the issue on which reassessment was made under Section 147/143(3) of the Act. The Commissioner, Mr. Agarwal has asserted, could not have had travelled beyond the grounds which triggered off the reassessment process. Mr. Agarwal's case is that in the earlier judgments of this Court, this question was not addressed to. The authorities relied upon by him on this point are (i) CIT v. Alagendran Finance Ltd. [2007] 293 ITR 1/162 Taxman 465 (SC) and Ranbaxy Laboratories Ltd. v. CIT [2011] 336 ITR 136/200 Taxman 242/12 taxmann.com 74 (Delhi). In the latter case, the assessing ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... which has been made Annexure "A" to the stay petition, that the issue of share capital at premium was examined by the assessing officer in the reassessment proceeding. There is specific reference to that aspect of the appellant's account in that order passed on 9th April 2010. The said order also records that detail with respect to increase of share capital submitted by the assessee was examined through issue of notice under Section 133(6) of the Act. Though the question of issue of share capital was not a factor which prompted the proceeding for reassessment, the triggering factor, being consultancy fees which had escaped assessment, was accepted by the assessing officer for undertaking the exercise of reassessment. Thus, it was permissible for the reassessing authority to widen the scope of reassessment. The judgment of the Delhi High Court in the case of Ranbaxy Laboratories Ltd. (supra) does not aid the appellant in its endeavour to invalidate the revisional proceeding. The principles enunciated in the case of Alagendran Finance Ltd. (supra) also cannot rescue the appellant, as infusion of share capital formed part of the reassessment procedure. The revisional proceeding w ..... X X X X Extracts X X X X X X X X Extracts X X X X
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