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TMI Blog2023 (6) TMI 1380X X X X Extracts X X X X X X X X Extracts X X X X ..... y 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. We find that AO has conducted extensive enquiry on the issues and directions mentioned u/s 263 and further on perusal of the impugned order, we notice that all the issue which the ld. Pr. CIT has referred has already been addressed by the AO in the detailed enquiry conducted in the course of assessment proceedings. It is neither a case of no enquiry nor a case of incomplete enquiry but it is a case where extensive enquiry has been conducted on which all the issues which have been raised in the impugned order and based on these detailed examination, ld. Assessing Officer came to a conclusion that the assessee has successfully satisfied, with documentary evidence as well as the evidence collected from the share applicants that the transactions of issuing shares at premium and received the share application money is a genuine transaction and the share applicants have successfully proved the identity and the creditworthiness to have invested in the equity shares capi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 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 directions was the order of the Pr CIT himself and could not have again been revised, as such the order is bad in law. 3. For that the initiation of proceedings u/s 263 by the Ld. Principal CIT on the ground that the order passed u/s 143(3)/263 suffers from lack of adequate enquiry is bad in law in as much as there is no case of lack of therefore the enquiry and revisionary order passed is liable to be quashed. 4. For that the Ld PCIT erred in holding vide para 4 that the Assessing Officer should have discussed about the details about the share issued and subscribed in the assessment order including with and without premium when it was not necessary to discuss each and every details in the assessment order and therefore the revisionary order passed on incorrect understanding of law deserves to be quashed. 5. For that the reasons given by the Ld PCIT vide para 4.4 that any order passed pursuant to section 263 must be in favour of revenue itself is erroneous and therefore the revisiona ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... . 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 revisionary proceedings, ld. Assessing Officer issued showcause notice u/s 263 of the Act on 16/01/2019 requiring the assessee to submit clarification/explanation with regard to the following issues:- 2. Subsequently, the assessment records of the assessee were called for on the basis of verification of the material available on records, it was found that the order of assessment was erroneous so far as it is prejudicial to the interest of revenue on the following grounds:- (i) The A.O. passed the order without carrying out detailed investigation/verification/independent enquiry regarding identity, creditworthiness of the shareholders also the genuineness of transactions relating to share capital that was intended to be carried out and merely accepted the submission of the assessee in this regard. (ii) That A.O has also failed to carryout detailed investigation of the shareholders on the very issue that how they decided to invest in such a company which was never known for its line of business and also ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... pecific 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 reasonable opportunity to the assessee company to produce documents evidences which it may choose to rely upon for substantiating its own claim. The AO is further directed to adjudicate the said issue de novo and pass a fresh assessment order in accordance with the relevant provisions of law. 5. Aggrieved, the assessee is now in appeal before this Tribunal. 6. The ld. Counsel for the assessee submitted that so far as the directions given by the ld. Pr. CIT in the order u/s. 263 of the Act dt. 02/12/2015, there was sufficient compliance made by the Assessing Officer as well as the assessee. All necessary details were called for by issuance of notice u/s 142(1) of the Act and complete details were filed. The issue of share capital and share premium was extensively examined by the Assessing Officer. Complete financial documents, income tax return and bank statements were filed with regard to the alleged share applicants, the ld. Assessing Officer also issued summons u/s 131 of the Act to the Directors of the assessee company as well a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 3 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 following decisions:- SI No. Particulars 1. Judgement of Hon ble Calcutta High Court in the case of PCIT-2 Kolkata vs. M/s. Bhagwati Vintrade Pvt. Ltd. [IA No. GA/2/2002] dated 18.11.2022 2. Judgment of Hon ble Calcutta High Court in the case of PCIT 2 Kolkata vs. M/s. Intent Dealers Pvt. Ltd. {IA No. GA/2/2022] 3. Judgment of ITAT Kolkata in the case of Animesh Autocorp (P) Ltd. vs. PCIT-4, Kolkata [ITA No. 1121/Kol/2019] dated 01.12.2022 4. Judgment of ITAT Kolkata in the case of M/s. Arman Advisory Pvt. Ltd. vs. PCIT -4, Kolkata [ITA No. 315/Kol/2021] dated 11.03.2022 5. Judgment of ITAT Kolkata in the case of Bhupati Dealmark Private Limited vs. Pr. CIT-4, Kolkata, [ITA No. 2405/Kol/2019] dated 22.12.2021 6. Judgment of ITAT Kolkata in the case of Amritrashi Infra Private Ltd. vs. PCIT4, Kolkata [ITA No. 838/Kol/2019] dated 12.08.2020 7. Judgment of ITAT Kolkata in the case of Bhagwati Vindtrade Private Limited vs. ITO Ward-10(4), Kolkata [ITA No. 303/Kol/2020] dated 17.02.2021 8. Judgment of ITAT Kolkata in the case of Omkar Infracon (P) Ltd. vs. ITO Ward 12(2) Kolkat ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e powers or in the performance of the functions of an Assessing Officer conferred on, or assigned to, him under the orders or directions issued by the Board or by the Chief Commissioner or Director General or Commissioner authorized by the Board in this behalf under section 120; (b) record shall include and shall be deemed always to have included all records relating to any proceeding under this Act available at the time of examination by the Commissioner; (c) where any order referred to in this sub-section and passed by the Assessing Officer had been the subject matter of any appeal filed on or before or after the 1st day of June, 1988, the powers of the Commissioner under this sub-section shall extend and shall be deemed always to have extended to such matters as had not been considered and decided in such appeal. (2) No order shall be made under sub-section (1) after the expiry of two years from the end of the financial year in which the order sought to be revised was passed. (3) Notwithstanding anything contained in sub-section (2), an order in revision under this section may be passed at any time in the case of an order which has been passed in consequence of, or to give effec ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ) has laid down following ratio with regard to provisions of section 263 of the Act: There can be no doubt that the provision cannot be invoked to correct each and every type of mistake or error committed by the Assessing Officer; it is only when an order is erroneous that the section will be attracted. An incorrect assumption of facts or an incorrect application of law will satisfy the requirement of the order being erroneous. In the same category fall orders passed without applying the principles of natural justice or without application of mind. The phrase 'prejudicial to the interests of the revenue has to be read in conjunction with an erroneous order passed by the Assessing Officer. Every loss of revenue as a consequence of an order of the Assessing Officer cannot be treated as prejudicial to the interests of the revenue, for example, when an ITO adopted one of the courses permissible in law and it has resulted in loss of revenue; or where two views are possible and the ITO has taken one view with which the Commissioner does not agree, it cannot be treated as an erroneous order prejudicial to the interests of the revenue unless the view taken by the ITO is unsustainable i ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ized or it has gone beyond realization. These two basic ingredients have to be satisfied as sine qua non for exercise of such power. On a perusal of the material brought on record and the order passed by the CIT it is perceptible that the said authority has not kept in view the requirement of s. 263 of the Act inasmuch as the order does not reflect any kind of satisfaction. As is manifest the said authority has been governed by a singular factor that the order of the AO is wrong. That may be so but that is not enough. What was the sequitur or consequence of such order qua prejudicial to the interest of the Revenue should have been focused upon. That having not been done, in our considered opinion, exercise of jurisdiction under s. 263 of the Act is totally erroneous and cannot withstand scrutiny. Hence, the Tribunal has correctly unsettled and dislodged the order of the CIT. [Emphasis supplied] 12. In the light of the provisions of section 263 of the Act and a settled position of law, powers u/s 263 of the Act can be exercised by the Pr. Commissioner/Commissioner on satisfaction of twin conditions, i.e., the assessment order should be erroneous and also prejudicial to the interest ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... at the CIT may pass an order exercising his power of revision. Minutely examined, the provisions of the section envisage that the CIT may call for the records and if he prima facie considers that any order passed therein by the AO is erroneous insofar 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 enquiry as he deems necessary, pass such order thereon as the circumstances of the case justify. The twin requirements of the section are manifestly for a purpose. Merely because the CIT considers on examination of the record that the order has been erroneously passed so as to prejudice the interest of the Revenue will not suffice. The assessee must be called, his explanation sought for and examined by the CIT and thereafter if the CIT still feels that the order is erroneous and prejudicial to the interest of the Revenue, the CIT may pass revisional orders. If, on the other hand, the CIT is satisfied, after hearing the assessee, that the orders are not erroneous and prejudicial to the interest of the Revenue, he may choose not to exercise his power of revision. This is for the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ot be invoked to correct each and every type of mistake or error committed by the AO and it was only when an order is erroneous that the section will be attracted. (iii) An incorrect assumption of facts or an incorrect application of law will suffice the requirement of order being erroneous. (iv) If the order is passed without application of mind, such order will fall under the category of erroneous order. (v) Every loss of revenue cannot be treated as prejudicial to the interests of the Revenue and if the AO has adopted one of the courses permissible under law or where two views are possible and the AO has taken one view with which the CIT does not agree. If cannot be treated as an erroneous order, unless the view taken by the AO is unsustainable under law (vi) If while making the assessment, the AO examines the accounts, makes enquiries, applies his mind to the facts and circumstances of the case and determine the income, the CIT, while exercising his power under s 263 is not permitted to substitute his estimate of income in place of the income estimated by the AO. (vii) The AO exercises quasi-judicial power vested in his and if he exercises such power in accordance with law and ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... y but finding recorded is erroneous and which is also prejudicial to the interest of the Revenue. In latter cases, the CIT has to examine the order of the Assessing Officer on merits or the decision taken by the Assessing Officer on merits and then hold and form an opinion on merits that the order passed by the Assessing Officer is erroneous and prejudicial to the interest of the Revenue. In the second set of cases, CIT cannot direct the Assessing Officer to conduct further enquiry to verify and find out whether the order passed is erroneous or not. 14. Now, examining the facts of the instant case in the light of the judicial precedents as discussed above in the preceding parts, we notice that during the financial year 2012-13, the assessee issued 1,11,000 equity shares at a face value of Rs.10/- and share premium of Rs.990/- per share and thus received Rs.11.10 Crores against the issue of equity shares. The assessee filed its return of income on 23/09/2012 and the return was scrutinized u/s 144 of the Act. These assessment records were called for by the ld. Pr. CIT in terms of the power available u/s 263 of the Act and noticed that in the balance sheet there was no closing stock. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... De novo with a direction to A.O to examine books of accounts and Ban accounts Purchase and sales of assessee company during the year. Further, A.O is also directed to examine the source of share application, identity of investors and should decide the issue as per law. The assessment proceedings may be initiated at the earliest and to be completed without waiting time barring date an sufficient opportunity of being heard to the assessee in order to meet natural justice, equity and fairness. 15. In compliance to the directions given u/s 263 of the Act, vide order dt. 02/12/2015, the ld. Assessing Officer commenced the scrutiny proceedings and called for the following details from the assessee:- Particulars of Accounts and/or documents required: 1. Reasonably detailed note on the nature of business including details of addresses, phone No. of all premises - Office, Branch, Godown, Workshop etc. 2. Details of all your income, Profit Loss account, Balance Sheet and Computation of income along with the copy of your Audited Accounts. 3. To provide list/ details of directors, present and past during the F.Y 2011-12 with their full addresses, contact details and copy of PAN; copy of ITR sh ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... f trade payables, details of sundry debtors, list of purchases during the year. The assessee has also filed the details of allotment of equity shares to three share subscribers, namely, M/s. Chaturanga Commercial Pvt. Ltd., M/s. Eastern Synthetics Pvt. Ltd. and M/s. Oven Commercial Pvt. Ltd.. Date-wise details were filed regarding the information received from banking channels. 18. Further, we notice that the Assessing Officer in order to make independent enquiry with the share applicants, called information u/s 133(6) of the Act from all the three share applicants commonly calling therefrom the following informations:- With reference to the above you are requested to furnish the following information for the Financial Year 2011-12 (A. Y. 2012-13) in respect of the transactions made by you with the above stated company :- 1. Copy of Share Application form Acknowledgment. 2. Mode of payment/s and copy of bank statement reflecting Investment Amount. 3. Provide complete details along with name, address and amount of the Source of fund for the above investment. 4. Copy of Balance Sheet and Profit and Loss Account for the A.Y. 2013-14 and I.T Acknowledgement receipt. 5. Copy of Board Re ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of the assessee company Shri Satya Narayan Bhartia made written submissions which were discussed with him and kept in the record. 19.1. From the above discussion, we find that the Assessing Officer has conducted extensive enquiry on the issues and directions mentioned u/s 263 of the Act which was given vide order dt. 02/12/2015 and further on perusal of the impugned order, we notice that all the issue which the ld. Pr. CIT has referred has already been addressed by the Assessing Officer in the detailed enquiry conducted in the course of assessment proceedings. It is neither a case of no enquiry nor a case of incomplete enquiry but it is a case where extensive enquiry has been conducted on which all the issues which have been raised in the impugned order and based on these detailed examination, ld. Assessing Officer came to a conclusion that the assessee has successfully satisfied, with documentary evidence as well as the evidence collected from the share applicants that the transactions of issuing shares at premium and received the share application money is a genuine transaction and the share applicants have successfully proved the identity and the creditworthiness to have investe ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e 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 such a case, the assessee would not have discharged the primary onus contemplated by Section 68 of the Act. The Hon ble Supreme court, thus, has held that once the assessee has submitted the documents relating to identity, genuineness of the transaction, and credit-worthiness of the subscribers, then the AO is duty bound conduct to conduct an independent enquiry to verify the same. However, as noted above, the Assessing Officer in this case has not made any independent enquiry to verify the genuineness of the transactions. The assessee having furnished all the details and documents before the Assessing Officer and the Assessing Officer has not pointed out any discrepancy or insufficiency in the said evidences and details furnished by the assessee before him. As observed above, the assessee having discharged initial burden upon him to furnish the evidences to prove the iden ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... a Devi Agarwal - Vs. CIT (1973) 88 ITR 323 (SC) held that in absence of proper enquiries the assessment order would become erroneous and prejudicial to the interest of the Revenue? iii) Whether the Learned Tribunal has committed substantial error in law in quashing the order under section 263 of the Act of PCIT dated 21.02.2020 whereas Apex Court in the case of Pr. CIT -Vs - NRA Iron Steel Pvt. Ltd. held that the practice of conversion of unaccounted money through the cloak of share capital and premium must be subjected to careful scrutiny? We have heard Mr. Samarjit Roychowdhury, learned standing Counsel along with Mr. Soumen Bhattacharjee for the appellant and Mr. S.M. Surana, learned Counsel duly assisted by Mr. Sengupta, learned Advocate for the respondent. On perusal of the order passed by the learned Tribunal we find that the finding recorded by the learned Tribunal is fully justified. We support such conclusion with the following reasons: The present proceeding arising out of the second round of proceedings under Section 263 of the Act. The learned Tribunal has carefully considered the factual position and noted that assessing officer has followed the direction issued in the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s of case as discussed above and as per submission of assessee, the assessment order was passed without making inquiries and verification which would have been made and therefore the order was passed on 13.03.2015 stands erroneous in so far as prejudicial to the interest of revenue and is set aside de novo with direction to AO to carry out proper examination of books of accounts including bank accounts of assessee as well as investors. AO is also directed to examine of credit appearing in the books of assessee as share capital including premium and nature of transactions, identity of investor and its genuineness. As directed by the Principal Commissioner of Income Tax-4, Kolkata in the order u/s. 263 as above notice u/s. 142(1) of the I. T. Act, 1961 was issued and served on the assessee on 12.07.2016 asking to produce relevant papers and documents. In response to notice u/s. 142(1) Sri Rajesh Kumar Agarwal, Director of the assessee company appeared time to time along with papers and documents as required to discuss the case. To ensure genuinity of transactions of the shareholder companies further notices u/s. 133(6) of the I. T. Act, 1961 were issued on 12.07.2016 to the parties f ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 84/2022, IA No. GA/2/2022 dated 18.1 1.2022 that the present proceeding arising out of the second round of proceedings under section 263 of the Act. The learned Tribunal has carefully considered the factual position and noted that assessing officer has followed the direction issued in the earlier order passed by the Section 263 of the Act. The Assessing Officer has issued summons under Section 131 of the Act to the directors of the Shareholding Company M/s Laxmi Timber Pvt. Ltd. in consonance with the direction issued by the Principal Commissioner of Income Tax under Section 263 of the Act. This finding would be seen from paragraphs 5 to 7 of the assessment order. Thus the learned Tribunal on re-verification of the facts found that this is not a case of non-application of mind nor this is a case of failure to reappreciate the facts and concluded that the view taken by the assessing officer was a plausible view. That apart we note that the assessing officer conducted thorough enquiry and has also examined the directors of the holding company. Thus the learned Tribunal rightly dismissed the appeal filed by the revenue. 9. Since the facts of the case before us are materially same as i ..... X X X X Extracts X X X X X X X X Extracts X X X X
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