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2021 (11) TMI 999 - AT - Income TaxRevision u/s 263 by CIT-A - inadequacy in enquiry on share application money - Addition u/s 68 - HELD THAT:- The assessee has established not only the source of loan obtained but has also adequately demonstrated before the AO the source of money in the hands of the share applicants. A small portion of cash deposited by lender doesn't necessarily signify any collusion with assessee. The relevant facts were present before AO and were scrutinized. Thus, the burden of proof cast upon the assessee was broadly discharged. A presumption can be safely drawn that the AO was armed with reasonable evidences to draw satisfaction with the explanation offered by the assessee towards receipt of share application money from various parties and consequently it can be said that the statutory discretion was exercised in favour of the assessee based on tell-tale evidences furnished by the assessee in this regard. The action of the AO thus cannot be wholly disregarded as untenable or implausible more so, where share applicants attended the enquiry and deposed on oath for the subscription made. The share applicants are assessed to tax and confirmed the subscription. On these facts, a question would arise as to whether it was incumbent upon the AO to disregard such evidences and hold the explanation to be unsatisfactory in terms of Section 68 of the Act or not. Having regard to the prerogative vested with the AO towards the extent and manner of inquiry for drawing satisfaction, it is difficult to hold that the action of the AO is unintelligible. In our view, the AO has not committed any error in not chasing 'will o the wisp' in the absence of any brazen circumstances. In the light of aforesaid discussion, the basis of issuance of show cause notice under s. 263 of the Act does not appear to be tenable in law in the peculiar set of facts. Consequently, the assumption of jurisdiction under s. 263 of the Act will have to be regarded as without authority of law. As noted, the share applicants have unequivocally confirmed the share subscription. In such facts, it will be difficult to discredit the share application money received per se and make additions in the realm of s. 68 of the Act in the hands of the assessee in place of the share applicants where 'source of source' allegedly remains unproved in the opinion of the PCIT. Therefore purported inadequacy in inquiry as alleged, cannot be stated to be 'erroneous' per se in so far as assessee is concerned, even if, such inaction of AO towards fuller enquiry is branded as 'prejudicial to the interest of Revenue'. Therefore, the mandatory twin conditions of Section 263 is also not found to be fulfilled when tested on the touchstone of taxability of share application money in the hands of assessee on the grounds of unproved source of source.We thus concur with the plea on behalf of the assessee that S. 263 proceedings cannot be inflicted upon the assessee in these circumstances. - Decided in favour of assessee.
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