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2021 (3) TMI 328 - AT - Income TaxRevision u/s 263 - Addition u/s 68 - HELD THAT:- For proving the identity of share applicants, the assessee furnished the name, address, PAN of share applicants together with the copies of balance sheets and Income Tax Returns. With regard to the creditworthiness of share applicants, these Companies are having enough capital and the investment made in the appellant company is only a small part of their capital. Transactions are also duly reflected in the balance sheets of the share applicants, so creditworthiness is proved. Even if there was any doubt if any regarding the creditworthiness of the share applicants was still subsisting, then AO should have made enquiries from the AO of the share subscribers as held by Hon’ble jurisdictional High Court in CIT vs DATAWARE [2011 (9) TMI 175 - CALCUTTA HIGH COURT] which has not been done, so no adverse view could have been drawn. Third ingredient is genuineness of the transactions, for which we note that the monies have been directly paid to the assessee company by account payee cheques out of sufficient bank balances available in their bank accounts on behalf of the share applicants. It will be evident from the paper book that the appellant has even demonstrated the source of money deposited into their bank accounts which in turn has been used by them to subscribe to the assessee company as share application. Hence the source of source of source is proved by the assessee in the instant case though the same is not required to be done by the assessee as per law as it stood/ applicable in this assessment year. The share applicants have confirmed the share application in response to the notice u/s 133(6) of the Act and have also confirmed the payments which are duly corroborated with their respective bank statements and all the payments are by account payee cheques. Assessee has discharged the onus on it; and twice the AO enquired about it and in the reassessment this issue has been thoroughly enquired as discussed supra and the view taken by AO is a plausible view in line with the judicial precedence supra and so it cannot be called erroneous. So the Ld PCIT erred in holding the AO’s re-assessment order as erroneous. AO has conducted enquiries in respect of share capital & premium collected by the assessee company before accepting the share subscribers identity, creditworthiness and genuineness of the transaction and being satisfied did not find it necessary to make any addition u/s 68 of the Act, which action could not have been interfered by the Ld. PCIT u/s 263 of the Act since the jurisdictional condition precedent for invoking the same is not satisfied in the facts of this case. However in case still if he (Ld. PCIT) wanted to exercise his jurisdiction despite the AO making enquiries as found by us then he (Ld. PCIT) should have himself conducted preliminary enquiry and should have been able to show that AO’s enquiry was not correctly made by finding deficiency/infirmity in the documents/ material collected by the AO or even able to disprove the transaction of share capital by bringing material to suggest that the share transaction of assessee was an eye wash. This exercise the Ld. PCIT has not carried out. So according to us, in the light of the enquiries conducted by the AO in respect of share transaction, the Ld. PCIT could not have found the action of AO to be erroneous for want of no enquiry. And the view taken by the AO in respect of share transaction is a plausible view; and at any rate cannot be termed as un-sustainable view. We note that the action of Ld. PCIT smacks of arbitraries and is bad in law for non-application of mind and the Ld. PCIT proceeded on wrong, assumption of facts. Since the Ld. PCIT has interfered by invoking 263 jurisdiction without satisfying the condition precedent i.e. AO’s order to be erroneous as well as prejudicial to the Revenue, the issuance of SCN and consequent impugned action is null in the eyes of law. Therefore, the assumption of revisional jurisdiction is bad in law and so quashed. - Decided in favour of assessee.
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