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2017 (3) TMI 138 - ITAT KOLKATA

2017 (3) TMI 138 - ITAT KOLKATA - TMI - 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 ci .....

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the case. Apart from the above, we also 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 co .....

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ng provisions u/s 92 of the Act and has 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 dat .....

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account of share premium. 3. The Assessee 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 expendit .....

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f assessment about any other aspect of the 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 rec .....

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huge transactions during different periods. 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 o .....

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kata Bench in the case of M/s. Bisakha Sales 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 .....

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mine the directors of subscriber companies 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 bri .....

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llowing are the findings of the Hon ble 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 a .....

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nduct a thorough enquiry, notwithstanding 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 presen .....

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of all such cases, the notices u/s 263 were 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 I .....

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amalgamating company. But, where the intention 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 oppor .....

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unal in the case of Subhlakshmi Vanijya 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 .....

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all the six share applicants who contributed 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 .....

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CIT in the impugned order passed u/s 263 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 .....

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wly formed company. It is for this reason of lack of proper inquiry that proceedings u/s 263 of the Act had been invoked by the CIT. The absence of the word erroneous order is not very fatal as reading of the entire order of the CIT would go to show that he was of the view that order of the AO was erroneous because the AO failed to make proper enquiries which were warranted in the facts and circumstances of the case. Apart from the above, we also find from para-16 of the impugned order that the .....

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