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M/s. Neelakantha Commosales Pvt. Ltd. Versus Commissioner of Income Tax, Kolkata-I, Kolkata

2017 (3) TMI 138 - ITAT KOLKATA

Revision u/s 263 - genuineness of the transaction of the receipt of share capital and the capacity and identity of the persons who were investors in the share capital of the assessee not checked by AO - Held that:- From a reading of the entire of the CIT it is clear that the main plank of the case of CIT is that mere sending notices u/s 133(6) of the Act to the various share applicants and getting their replies was not sufficient, in the given facts and circumstances of the case, namely the rece .....

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find from para-16 of the impugned order that the CIT has clearly observed that order of the AO was erroneous and prejudicial to the interest of the revenue. - The reference in the impugned order regarding existence of nine share holders when in fact there are only six share holders, in our view is not very material. What is material is the quality of enquiry that was made by the AO. This enquiry was not proper and had not been carried to its logical conclusion. The fact that proceedings init .....

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no relevance to the present case. We therefore hold that jurisdiction u/s 263 was properly exercised by the CIT and his action does not call for any interference. - Decided against assessee. - ITA No.644/Kol/2015 - Dated:- 1-3-2017 - SHRI P.M.JAGTAP, AM AND SHRI N.V. VASUDEVAN, JM For The Applicant : Shri S.M.Surana, Advocate For The Respondent : Shri Niraj Kumar, CIT ORDER Per N.V.Vasudevan, JM This is an appeal filed by the assessee against the order dated 25.03.2015 of CIT Kolkata- I, Kolkata .....

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e filed return of income on 07.09.2009 disclosing total income of ₹ 790/- for A.Y.2009-10. Thereafter the assessee offered voluntarily certain income to tax and based on such disclosure proceedings u/s 147 of the Act were initiated. In such proceedings the AO brought to tax consultancy fees not disclosed of ₹ 24,000/- and also disallowed share issue expenses of ₹ 5,000/- which according to the AO were not in the nature of revenue expenditure. Consequently the AO passed an order .....

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he receipt of share capital by the assessed during the previous year. The AO passed an order u;/s 143(3) r.w.s. 147 of the Act on 07.08.2012. 4. The CIT in exercise of his powers u/s 263 of the Act was of the view that the aforesaid order of the AO was erroneous and prejudicial to the interest of the revenue in as much as the AO did not make a thorough and proper enquiry which were required in the case to check the genuineness of the transaction of the receipt of share capital, the capacity and .....

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ods. The Assessee being a newly formed company scrutiny in respect of the peculiar nature of such bank transactions were required to be made. Hence the CIT was of the view that thorough and proper inquiry into the existence, credit-worthiness and genuineness of subscribers in the case as claimed by the assessee company was not made by the A.O., nor the genuineness of the company and its directors were examined. 6. The CIT issued show cause notice u/s 263 of the Act. In reply to the show cause no .....

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ales Pvt. Ltd as bogus transactions. The CIT also came to the conclusion that the AO failed to carry out proper verification of the transactions of the share capital by the assessee and finally passed an order directing the AO to make proper inquiry with regard to the receipt of share capital and share premium by the assessee. The following were the conclusions of the CIT in this regard :- 16. In view of the above, the order passed by the A,O, is erroneous and prejudicial to the interest of reve .....

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es by issuing summons u/s 131 of the I.T. Act. The A.O. should conduct thorough independent enquiries to verify the documents filed before him in respect or proof of subscription to share-capital/share-premium. The A.O. should pass speaking order after providing reasonable opportunity to the assessee and verifying the source of share capital including the share premium of all the subscribers so as to ascertain the true nature of transactions which will bring to the fore the reality of transactio .....

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Tribunal in the case of Subhlakshmi Vanijya Pvt. Ltd. vs. CIT (supra) on receipt of share capital by several assesses whose modus operandi and the facts and circumstances under which order u/s 147 was passed and was revised by order u/s 263 of the Act are identical: A. Contention of the assessee that since the AO of the assessee-company was not empowered to examine or make any addition on account of receipt of share capital with or without premium before amendment to section 68 by the Finance Ac .....

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g the jurisdiction of the AO in making enquiries on the issues or matters as he considers fit in terms of section 142(1) and 143(2) of the Act, which is relevant only up to the completion of assessment ; iii) Inadequate inquiry conducted by the AO in the given circumstances is as good as no enquiry and as such, the CIT was empowered to revise the assessment order ; iv) The order of the CIT is not based on irrelevant considerations and further in the present circumstances, he was not obliged to p .....

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ere properly served through affixture or otherwise. Further the law does not require the service of notice u/s 263 strictly as per the terms of section 282 of the Act. The only requirement enshrined in the provision is to give an opportunity of hearing to the assessee, which has been complied with in all such cases. D. Limitation period for passing order is to be counted from the date of passing the order u/s 147 read with sec. 143(3) and not the date of Intimation issued u/s 143(1) of the Act, .....

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tention of the assessee is to defraud the Revenue by either filing returns, after amalgamation, in the old name or otherwise, then the order passed in the old name is valid. H. Order passed u/s 263 on a non-working day does not become invalid, when the proceedings involving the participation of the assessee were completed on an earlier working day. I. Order u/s 263 cannot be declared as a nullity for the notice having not been signed by the CIT, when opportunity of hearing was otherwise given by .....

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Pvt. Ltd. vs. CIT (supra). In this regard he brought to our notice that share capital and share premium was received by the assessee was from six different persons as follows :- 10. He drew our attention to the order of CIT u/s 263 of the Act and pointed out that the CIT has presumed that there were nine share holders and the AO issued notices u/s 133(6) of the Act only to six out of the nine share holders. He pointed out that the AO had issued notices to all the six share holders. These share h .....

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buted to the capital of the assessee company, proceedings u/s 263 of the Act had been initiated by the CIT on the ground that the AO in their cases had not properly investigated receipt of share capital and share premium by them. He also brought to our notice the fact that these proceedings were dropped by CIT. Copies of the relevant show cause notice u/s 263 of the Act and the order dropping the proceedings u/s 263 of the Act in the case of the six share applicants are placed at pages 186 to 19 .....

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of the Act are unsustainable. It was also submitted by him that the receipt of share premium is a capital item and not in the nature of income and in this regard he placed reliance on the CBDT Instruction No.2 of 2015 dated 29.01.2015. It was also submitted that the impugned order of the CIT merely states that order of the AO is prejudicial to the interest of the revenue and nowhere it has been mentioned that order of the AO is erroneous. According to him therefore the condition precedent for e .....

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