9911796707
TMI Blog2023 (6) TMI 1380X X X X Extracts X X X X X X X X Extracts X X X X ..... that the period of delay falls during the time of Pandemic of Covid-19 which has been excluded by the Hon'ble Supreme Court in the case of suo moto Writ Petition (C) No. 3 of 2020 dated 10.01.2022 by which the period from 15.03.2020 to 28.02.2022 has been directed to be excluded for the purpose of limitation. Vide this order a further period of 90 days has been granted for providing the limitation from 01.03.2022. Accordingly, we condone the delay and proceed to admit the appeal for hearing. 3. The assessee is in appeal before this Tribunal raising the following grounds: "1. For that the Ld. Principal CIT erred in exercising the power of revision for the purpose of directing the A.O. to hold another investigation when the A.O. had complied with the directions of the predecessor Principal CIT, Kolkata-4 in the preceding order u/s 263 passed on 02.12.2015 and there is no finding in the order now passed that the AO failed to carry out the directions in the earlier order u/s 263. 2. For that the Ld Pr CIT erred in invoking the provisions of section 263 when the order passed in consequence to the order of the Ld Pr. CIT in the first-round after carrying out the specific direction ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e Assessing Officer to carry out proper examination of the books of account, purchase and sale, loans and advances, investment in bank account and also examined the source of share application, identity of the investors and its genuineness. In compliance to the directions given by the ld. Pr. CIT in the order u/s 263 of the Act dt. 02/12/2015, the ld. Assessing Officer carried out the assessment proceedings and also called for the details about the share application money and share premium amounting to Rs.11.10 Crores. The ld. Assessing Officer also called for the various other details in the notice issued u/s 142(1) of the Act. There was sufficient compliance to the said notices and information called for by the Assessing Officer. Summons were also issued u/s 131 of the Act and the Directors were produced and statements were recorded. Based on these detailed investigation and examining the details filed by the assessee, the ld. Assessing Officer concluded the assessment. Subsequently, the ld. Pr. CIT again called for the assessment records which was forming part of the record for the scrutiny proceedings carried out vide order dt. 17/05/2016. 4.1. In the second round of revisiona ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 016, as erroneous and prejudicial to the interest of the revenue. Para 7 of the impugned order reads as follows:- "7. I have carefully considered and perused that the material available on record and found that the issues pointed out in the show cause needs verification as merely accepting submission without calling for logically relevant material/evidences in order to have an overview of totality of facts and circumstances, during the course of assessment proceedings the A.O. failed to examine the above referred issue rendering the assessment order erroneous on the ground of lack of enquiry. After having considered the position of law and facts and circumstances of the instant case, I am of the considered opinion that the assessment order passed by the A.O. is erroneous in so far as it is prejudicial to the interest of revenue in accordance with the Explanation 2 (c) below section 263 (1) of the Act on the ground of lack of enquiry. Accordingly, the assessment dated 28-10-2016 passed u/s 143(3)/263 is set aside de-novo on specific issue as outlined in above para 2 with a direction to Assessing Officer to cause adequate and effective enquiry. The A.O. is directed to provide reaso ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... reof 6. Notice u/s 133(6) dated 26.04.2016 to M/s. Oven Commercials Pvt. Ltd. and its reply with enclosures 7. Notice u/s 133(6) dated 26.04.2016 to M/s. Chaturang Commercials Pvt. Ltd. and its reply with enclosures 8. Notice u/s 133(6) dated 26.04.2016 to M/s. Eastern Synthetics Pvt. Ltd. and its reply with enclosures 9. Statement of Shri Satya Narayan Bhartia director of shareholder Oven Commercial P. Ltd. recorded u/s 131 10. Statement of Shri Sanjay Kumar Bhartia director of shareholder Chaturanga Commercial P. Ltd. recorded u/s 131 11. Statement of Shri Subhash Chandra Bhartia director of shareholder Easter Synthetics P. Ltd. recorded u/s 131 12. Statement of Shri Nitesh Bhartia director of assessee company recorded u/s 131 13. Assessment order u/s 144/147 of Oven Commercial Pvt. Ltd. for AY 2012-13 14. Assessment order u/s 143(3) of Eastern Synthetics Pvt. Ltd. for AY 2012-13 15. Assessment order u/s 143(3) of Chaturang Commercial Pvt. Ltd. for AY 2012- 13 16. Assessment order u/s 263/143(3) of Rani Sati Agro Tech Pvt. Ltd. for AY 2012- 13 17. Notice u/s 263 dated 16.01.2019 18. Order u/s 263 dated 02.12.2015 7. Further reliance was placed on the fo ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ore, it is pertinent to take note of this section. It reads as under: "263(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 in so far as it is prejudicial to the interest 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. Explanation- For the removal of doubts, it is hereby declared that, for the purposes of this sub-section,- (a) an order passed on or before or after the 1st day of June, 1988 by the Assessing Officer shall include- (i) an order of assessment made by the Assistant Commissioner or Deputy Commissioner or the Income-tax Officer on the basis of the directions issued by the Joint Commissioner under section 144A; (ii) an order made by the Joint Commissioner in exercise of the powers or in the performance of the functions of an Assessing Officer ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... to the interests of the Revenue. By this stage the learned Commissioner was not required the assistance of the assessee. Thereafter the third stage would come. The learned Commissioner would issue a show cause notice pointing out the reasons for the formation of his belief that action u/s 263 is required on a particular order of the Assessing Officer. At this stage the opportunity to the assessee would be given. The learned Commissioner has to conduct an inquiry as he may deem fit. After hearing the assessee, he will pass the order. This is the 4th compartment of this section. The learned Commissioner may annul the order of the Assessing Officer. He may enhance the assessed income by modifying the order. He may set aside the order and direct the Assessing Officer to pass a fresh order. At this stage, before considering the multi-fold contentions of the ld. Representatives, we deem it pertinent to take note of the fundamental tests propounded in various judgments relevant for judging the action of the ld. Pr. CIT taken u/s 263. 11. Hon'ble Supreme Court in the case of Malabar Industrial Co. Ltd. vs. CIT (2000) 243 ITR 83 (SC) has laid down following ratio with regard to provis ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... unless the view taken by the ITO is unsustainable in law." 11.2. Hon'ble Madhya Pradesh High court in the case of CIT vs. Associated Food Products (P) Ltd as reported in 280 ITR 0377 has held that: "10. In view of the aforesaid pronouncement of law and taking into consideration the language employed under s. 263 of the Act, it is clear as crystal that before exercise of powers two requisites are imperative to be present. In the absence of such foundation exercise of a suomoto power is impermissible. It should not be presumed that initiation of power under suomoto revision is merely an administrative act. It is an act of a quasi-judicial authority and based on formation of an opinion with regard to existence of adequate material to satisfy that the decision taken by the AO is erroneous as well as prejudicial to the interests of the Revenue. The concept of "prejudicial to the interests of the Revenue" has to be correctly and soundly understood. It precisely means an order which has not been passed in consonance with the principles of law which has in ultimate eventuate affected realization of lawful revenue either by the State has not been realized or it has gone beyond reali ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Act on merits and still storing the issue of allowability of deduction under section 54 of the Act to the file of Assessing Officer even though the working of allowability of deduction under section 54F is available in the order under section 263 which is not disputed by the assessee before ITAT." 13. We find that the Hon'ble Delhi High Court in the case of CIT vs. Anil Kumar reported in 335 ITR 83 has held that where it was discernible from record that the A.O has applied his mind to the issue in question, the ld. CIT cannot invoke section 263 of the Act merely because he has different opinion. Relevant observation of the High Court reads as under: "63. We find the Hon'ble Delhi High Court in the case of Vikas Polymer reported in 341 ITR 537 has held as under: "We are thus of the opinion that the provisions of s. 263 of the Act, when read as a composite whole make it incumbent upon the CIT before exercising revisional powers to: (i) call for and examine the record, and (ii) give the assessee an opportunity of being heard and thereafter to make or cause to be made such enquiry as he deems necessary. It is only on fulfilment of these twin conditions that the CIT may ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ible view, therefore, merely because the DIT does not agree with the opinion of the A.O., he cannot invoke the provisions of section 263 to substitute his own opinion. It has further been held in several decisions that when the A.O. has made enquiry to his satisfaction and it is not a case of no enquiry and the DIT/CIT wants that the case could have been investigated/ probed in a particular manner, he cannot assume jurisdiction u/s 263 of the Act. In view of the above discussion, we hold that the assumption of jurisdiction by the DIT u/s 263 of the Act is not in accordance with law. We, therefore, quash the same and grounds raised by the assessee are allowed." 13.1. The ITAT in the case of Mrs. Khatiza S. Oomerbhoy vs. ITO, Mumbai, 101 TTJ 1095, analyzed in detail various authoritative pronouncements including the decision of Hon'ble Supreme Court in the case of Malabar Industries 243 ITR 83 and has propounded the following broader principle to judge the action of CIT taken under section 263: "(i) The CIT must record satisfaction that the order of the AO is erroneous and prejudicial to the interest of the Revenue. Both the conditions must be fulfilled. (ii) Sec. 263 cann ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he Tribunal are correct as the CIT has not gone into and has not given any reason for observing that the order passed by the Assessing Officer was erroneous. The finding recorded by the CIT is that "order passed by the Assessing Officer may be erroneous". The CIT had doubts about the valuation and sale consideration received but the CIT should have examined the said aspect himself and given a finding that the order passed by the Assessing Officer was erroneous. He came to the conclusion and finding that the Assessing Officer had examined the said aspect and accepted the respondent's computation figures but he had reservations. The CIT in the order has recorded that the consideration receivable was examined by the Assessing Officer but was not properly examined and therefore the assessment order is "erroneous". The said finding will be correct, if the CIT had examined and verified the said transaction himself and given a finding on merits. As held above, a distinction must be drawn in the cases where the Assessing Officer does not conduct an enquiry; as lack of enquiry by itself renders the order being erroneous and prejudicial to the interest of the Revenue and cases where the Asse ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he A.O had taken a wrong figure of share capital raised by assessee company. The AO grossly ignored the examination/verification of share capital raised by assessee company, sources of capital, Sales and Purchase of assessee company and genuineness of transaction, which was the outmost requirement, before completion of assessment proceedings. This clearly shows that the assessment was completed without proper examination/verification. The jurisdictional High Court, in the case of CIT vs Maithan International, in ITA No-375 ITR 123 (Cal), 2015 held that 23. It is not the law that the Assessing Officer Occupying the position of an investigator and adjudicator can discharge his function by perfunctory or inadequate investigation. Such a course is bound to result in erroneous and prejudicial orders. Where the relevant enquiry was not undertaken, as in this case, the order is erroneous and prejudicial too and therefore, revisable. Investigation should always be faithful and fruitful...... Considering the facts and circumstances of case and submission of assessee, the order passed or 14.03.2015 stands erroneous in so far as prejudicial to the interest of revenue and therefore ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... with their correct postal address. Please state if any change of address has taken place. 10. Provide all documents received along with the share applications, also provide letter of allotment, Board's resolution for inviting the share application with premium amount, increase of authorized share capital with respective form, allotment of shares with respective forms and copy of annual return. 11. Furnish your detail explanation with respect to the share applicant for their identity genuineness & creditworthiness. 12. Any other details and/or documents for the purpose of assessment." 16. The ld. Assessing Officer also called for the following details of the share application money received during the year under the letter dt. 06/05/2016:- "1. From all your submission and replies received which is nothing new and the same bunch of documents re-submitted related to the share application money, thus after careful examination of these records you are here being show caused to explain in details with documents why these share applicants money received including premium during the year should not be treated as cash credit and added u/s 68 of the I T Act, 1961 to your ta ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... . Assessing Officer moved a step forward and issued summons to the directors of the assessee company as well as investing companies to which necessary compliance was made and all the summoned persons appeared before the Assessing Officer and recorded under oath on 05/05/2016 and they form part of the assessment records. The specific observation of the Assessing Officer in the order dt. 17/05/2016. Relating the examination of share application money is reproduced below:- "Thus consequent to the order of Ld. Pr. Commissioner of Income Tax4, Kolkata, the case was taken for hearing and notice u/s 142(1) dated 07/01/2016 was issued and served upon the assessee fixing date of hearing on 15/01/2016. A detailed submission as per requisition u/s 142(1) of the IT Act 1961 was made by the assessee on the date of hearing at 15/01/2016. Further from time to time the director of the assessee company Shri Nitesh Bhartiya appeared on 18.03.2016, 04.04.2016, 26.04.20.16 etc. and made submission, further notice u/s 133(6) of the IT Act 1961 were issued on the investing companies, their replies received were pursued and kept on record, summons u/s 131 was issued to the director of the assessee comp ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Ltd. (supra). We note that the Hon'ble Supreme Court in the said case has taken note of the observations made by the Supreme Court in the "the land mark case of Kale Khan Mohammed Hanif v. CIT [1963] 50 ITR 1 (SC) and Roshan Di Hatti v. CIT [1977] 107 ITR 938 (SC) laying down the proposition that the onus of proving the source of a sum of money found to have been received by an assessee, is on the assessee. Once the assessee has submitted the documents relating to identity, genuineness of the transaction, and credit-worthiness, then the AO must conduct an inquiry, and call for more details before invoking Section 68. If the Assessee is not able to provide a satisfactory explanation of the nature and source, of the investments made, it is open to the Revenue to hold that it is the income of the assessee, and there would be no further burden on the revenue to show that the income is from any particular source." Thereafter the hon'ble Supreme court summed up the principles, which emerged after deliberating upon various case laws, as under : "11. The principles which emerge where sums of money are credited as Share Capital/Premium are : i. The assessee is under a legal obligation ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... , which has been confirmed by the Hon'ble Jurisdictional High Court vide order dt. 18/11/2022. Relevant finding of this Tribunal in the case of M/s. Pearl Tracom Pvt. Ltd. (supra) reproduced below:- "19. We notice that the issues raised in the instant appeal and facts brought before us are almost identical to the issues dealt by this Tribunal in the case of Bhagwati Vintrade Private Limited (supra) and this decision of this Tribunal was challenged by the Revenue before the Hon'ble Jurisdictional High Court but Revenue failed to succeed as the decision of this Tribunal stands confirmed by the Hon'ble Jurisdictional High Court observing as follows: "The Court This appeal filed by the revenue is directed against the order dated 17.02.2021 passed by the Income Tax Appellate Tribunal, "A" Bench, Kolkata (Tribunal) in ITA No. 303/Kol/2020 for the assessment year 2013-2014. The revenue has raised the following substantial questions of law for consideration : i) Whether the Learned Tribunal has committed substantial error in law by not upholding the order passed under section 263 of the Income Tax Act, 1961 by Principal Commissioner of Income Tax as because the assessment o ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Thus the learned Tribunal rightly dismissed the appeal filed by the revenue. Considering the facts and circumstances of the case we find that there is no question of law much less substantial question of law arising for consideration in this appeal. Accordingly, the appeal fails and dismissed." 20. The above judgment of Hon'ble Jurisdictional High Court has recently been followed by this Tribunal in the case of Swasti Realinfra Pvt. Ltd. (supra) where also similar issue came for adjudication and the order u/s 263 of the Act has been quashed by this Tribunal observing as follows: "7. We have heard rival submissions, carefully perused the material available on record, the impugned appellate order, the assessment order passed in the set aside proceeding and the decision cited before us in the case of Omkar Infracon (P) Ltd. (supra) and the decision of jurisdictional High Court in the case of PCIT Vs Bhagwati vintrade Pvt Ltd(supra). We observe on the basis of the records before us that Ld. Pr. CIT has revised the assessment on the ground lack of enquiry on the part of the AO into the issue of investment of share capital and share premium. However, we note that in the set a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... reports and I. T. Returns. (v) In all the cases the investments is duly reflected in the Annual Accounts of the investor. (vi) Moreover, summon u/s. 131 was also issued to the director of the company. In response to the summon u/s. 131 the director of the company appeared and give statement along with relevant papers. In view of the above observations, the total income of the assessee is computed as per separate computation sheet attached. Assessed u/s. 264/143(3) for a total income of Rs. NIL." 8. We note from the above findings of the AO that while giving effect to the directions of the Ld. Pr. CIT, AO issued notice u/s. 142(1) of the Act to the assessee which was duly complied with by filing necessary documents and informations. We note that the AO also issued notices u/s. 133(6) on 12.07.2016 to the parties from whom the funds were raised by the assessee and verified the source of investments, identity and genuineness. The said investor companies duly responded to the said notice and thereafter the AO recorded his satisfaction accepting the said investments in the hands of the assessee. Considering the above facts, we are of the view that the jurisdiction u/s. 26 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ies have appeared before ld. AO and recorded the statements on oath explaining that the investor companies had sufficient legitimate fund to justify the investment in equity share capital of the assessee company and based on these details and submissions and detailed enquiry ld. AO after making proper application of mind and taking a view permissible under the law was satisfied that the assessee has duly explained the alleged share capital and share premium and which thus, do not call for any addition u/s 68 of the Act. 22. Under these given circumstances, we are of the considered view that ld. Pr. CIT grossly erred in assuming the jurisdiction u/s 263 of the Act and also erred in holding the assessment order dated 30.12.2016 as erroneous and prejudicial to the interests of the Revenue. We, therefore quash the impugned order u/s 263 of the Act dated 12.03.2019 and restore the assessment order u/s 143(3) r.w.s. 263 of the Act dated 30.12.2016. Thus, all the grounds raised by the assessee are allowed." 22. We, therefore, respectfully following the decision of this Tribunal in the case of M/s. Pearl Tracom Pvt. Ltd., as the facts involved in the instant case are identical, are of ..... X X X X Extracts X X X X X X X X Extracts X X X X
|
