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TMI Blog2023 (6) TMI 725X X X X Extracts X X X X X X X X Extracts X X X X ..... ich is sufficient enough to justify the source of share capital received by the assessee from the director. Assessee company has duly explained the sources of fund in the hand of Shri Ramesh Vardhan. The revenue authority also accepted the partial amount but not accepted source of the other amount only based on surmises and conjecture. Thus, we hold that the assessee has discharged the onus cast u/s 68 of the Act with respect to receipt of share application money from Shri Ramesh Vardhan. Decided in favour of assessee. X X X X Extracts X X X X X X X X Extracts X X X X ..... tion 68 of the Act. 3.3 In view of the above, the AO made draft assessment under section 144C of the Act wherein he made addition of Rs. 1,23,39,500/- under section 68 of the Act and addition of Rs. 1,05,96,120/- being TP adjustment as per the order of the TPO. 4. Against the draft assessment order, the assessee filed objection before the learned DRP and made the following submission. a) Regarding addition under section 68 of the Act The assessee before the learned DRP submitted that Shri Ramesh Vardhan is an existing shares holder to whom fresh shares were issue during the year under consideration. Shir Ramesh Vradhan is high income individual declaring average annual income for last 4 years over Rs. 64 Lakh and in the year under consideration declared income of Rs. 1,01,08,046/- only. Shri Remesh Vardhan made investment in the shares out of the fund from opening bank balance, salary income, redemption of mutual fund and temporary loan from friends and relative. The amount of share application money was received through banking channel which can be verified from the bank account of the company and corresponding entry in the bank account of Shri Ramesh Vardhan. The assessee in ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 900/- as share capital and Rs. 98,71,600/- as share premium) towards the allotment of 24,679 equity shares cannot be trated as unexplained. Therefore, keeping in view the facts and circumstances of the case, as discussed in earlier part of this order, it is our view in that the brought forward balance of Rs. 10,43,192.53 and Rs. 2,28,407.21 as on 01.04.2017, as appearing in the bank statements of the assessee with ICICI Bank can be considered as explained for the purpose of investment in equity shares issued to Sh Ramesh vardan. 5.3.17 further, the amount credited to the bank account of Sh Ramesh Varadan towards Commission income of Rs. 5,96,166/- and salary received from the for the purpose of investment in equity shares issued. 07/04/2017 291,667 06/05/2017 299,667 17/06/2017 2,99,637 10/07/2017 2,99,673 05/08/2017 2,99,890 04/09/2017 2,99,890 11/10/2017 2,99,690 10/11/2017 2,99,690 11/12/2017 2,99,690 12/01/2018 2,99,690 15/02/2018 2,99,690 12/03/2018 2,99,690 Total 35,88,564 5.3.18 As regards the redemption of mutual fund Rs. 28.85.398/- on 07.07.2017 and rs.35,15,118/-on 10.07.2017, we have noted that the source of these investment ar ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ding paras. 5.3.22 In view of the aforesaid, the Ground of Objection No.1 is partly allowed. 5.5.23 We may clarify that our above findings are limited to genuine of the transaction as claimed by the assessee in the Grounds of Objections to be the source of funds for investment in equity shares to sh. Ramesh Varadan. We have not expressed any view on the genuineness or otherwise of any other transaction appearing in the documents/bank statements submitted by Sh Ramesh Varadan an issue which lies in the domain of the AO having jurisdiction over the case of Sh Ramesh Varadan. b) Regarding TP adjustments: 6.3.8 In view of the aforesaid the plea of the assessee that the Share Premium received from Foreign Holding Company at the time of issue of equity share is capital nature transaction and income cannot be said to arise from this transaction, hence Section 92 is not applicable, cannot be accepted and hence rejected. 6.3.9 Further, the fact that the TPO has determined the ALP of the international transaction of Investment in Equity Shares at Rs. 9,00,01,959/- for issue of equity shares to its AE. GYPM, China at Rs 5,71,77,900/- and thereafter not proposed any adjustment for th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... o the TPO on account international transaction of Investment in Equity Shares at Rs. 9,00,01,959/- disclosed by the assessee itself at S. No. 16 of Form No. 3CEB Further, keeping in view the provisions of section 92CA of the Income-tax Act, which provides that (2A) Where any other international transaction [other than an international transaction referred under sub-section (1) comes to the notice of the Transfer Pricing Officer during the course of the proceedings before him the provisions of this Chapter shall apply as if such other international transaction is an international transaction referred to him under sub-section (1), we do not find any infirmity in the action of the TPO making an adjustment in the arm s-length price of the international transaction of "purchase of goods/spare parts either 6.3.11 We also find no merits in the plea taken by the assessee that the proceedings initiated by the AO is without taking prior approval in writing from the higher authority. We have noted that the case was transferred from the jurisdictional AO, the Deputy Commissioner of Income Tax Circle 4(1) Ahmedabad, to National e- Assessment Centre, Delhi under the E-assessment Scheme, 2 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... have been selected for scrutiny in the current Financial Year- one is 'Limited Scrutiny' and other is 'Complete Scrutiny'. The assessees concerned have duly been intimated about their cases falling either in 'Limited Scrutiny' or 'Complete Scrutiny' through notices issued under section 143(2) of the Income-tax Act, 1961 ('Act'). The procedure for handling 'Limited Scrutiny' cases shall be as under: a. In 'Limited Scrutiny' cases, the reasons/issues shall be forthwith communicated to the assessee concerned. b. The Questionnaire under section 142(1) of the Act in 'Limited Scrutiny' cases shall remain confined only to the specific reasons/issues for which case has been picked up for scrutiny. Further, the scope of enquiry shall be restricted to the 'Limited Scrutiny' issues. c. These cases shall be completed expeditiously in a limited number of hearings. d. During the course of assessment proceedings in 'limited Scrutiny' cases, if it comes to the notice of the Assessing Officer that there is potential escapement of income exceeding Rs. five lakhs (for metro charges, the monetary limit shall be Rs. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s, enquiry, investigation etc. would be restricted to such issues. Only upon conversion of case to 'Complete Scrutiny' after following the procedure outlined above, the AO may examine the additional issues besides the issue(s) involved in 'Limited Scrutiny'. The AO shall also expeditiously intimate the taxpayer concerned regarding conducting 'Complete Scrutiny' in such cases. 9.2 Coming to the case on hand, the AO made addition under section 68 of the Act on account of credit of share application money from one Shri Ramesh Varadan and TP adjustment on purchases of Goods. 9.3 First, we proceed to adjudicate the issue of addition on account of TP adjustment representing transaction of purchase of goods/spares. In this regard, we find that a notice under section 143(2) of the Act was issued for "Limited Scrutiny" for examination of "receipt of large volume of Premium on share and to verify the applicability of provision of section 56(2)(vii) of Act or any other relevant section". There was no mentioning/whisper about examination of the fact with regard to "purchase made from an AE" which requires determination of ALP as per the provision of section 92 to 92CA ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ake a full-fledged assessment in limited scrutiny cases, the Commissioner (Appeals)'s power could not be enlarged beyond the power of the Assessing Officer in limited scrutiny cases. So, it was considered appropriate to remit the issue relating to allowance of depreciation in respect of the plinth to the file of the Assessing Officer for the purpose of fresh decision in accordance with law. Since the notice under section 143(2)(i ) was issued for limited scrutiny, the Assessing Officer was precluded from considering any other issue while making the assessment under section 143(3) under limited scrutiny. The decision of the Commissioner (Appeals) in considering the other claim of the assessee not covered in the notice issued under section 143(2)(i) for limited scrutiny was contrary to the provisions of the Act and, accordingly, was set aside. 9.5 In view of the above and after considering the facts in totality as discussed above, we are not convinced with the finding of the authorities below. As such the entire issue should have been limited to the extent of the dispute raised in the notice issued under section 143(2) of the Act for the limited scrutiny but the AO in the present ca ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ayment by account payee cheque was not sacrosanct nor could it make a non-genuine transaction genuine." 9.8 In case on hand, the identity of party subscribing share of the assessee i.e. Shri Ramesh Vardhan is not in dispute. As such the dispute is only limited to the extent of source of investment by the Shri Ramesh Vardhan in the shares of assessee company. The assessee before the AO/learned DRP furnished the copy of ITR of the impugned party for last 4 years, his bank statement and chart explaining the sources of credit in his bank account which was ultimately utilized for making investment in the share of the assessee company. As per the chart submitted by the assessee company, the bank account of Shri Ramesh was credited for Rs. 1,62,35,776/- (including opening balance of Rs. 23,41,501/- as on 30-06-17) on account of salary/remuneration from assessee company, redemption of mutual fund, advance received back from assessee company and loan from friends/relatives. The DRP/AO treated the amount Rs. 54,56,329/- credited in bank account of Shri Ramesh Vardhan on account of salary, commission income and opening bank balance from explained sources. As such the amount of credit of Rs 6 ..... 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