TMI Blog2017 (5) TMI 631X X X X Extracts X X X X X X X X Extracts X X X X ..... :- As to whether enquiry into high share premium ought to have been made by the AO and also as to what was the justification for such high premium could to be investigated by the AO at all because the 1st proviso to Sec.68 of the Act inserted by the Finance Act, 2012 w.e.f. 1-4.2013 was only prospective in operation, we are of the view that since section 68 covers `any sum credited’ in the books without any exception, which, inter alia, includes share capital, it cannot be held that the examination of share capital with premium etc. was earlier outside the ambit of section 68 and now this amendment has brought it into its purview. The amendment has simply made express which was earlier implied. We are therefore of the view that the assessee is always obliged to prove the receipt of share capital with premium etc. to the satisfaction of the AO, failure of which calls for addition u/s 68 of the Act. The argument with regard to non application of mind by the CIT is without any basis as all show cause notice u/s.263 of the Act were issued by him and ultimately he has passed the impugned order. There is no material brought on record to show that the CIT acted without application of m ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ted about ₹ 3.38 crores in the said hotel/resorts during the financial years 2006-07, 2007-08,200R-09 and 2009-10. The sources of fund i.e ₹ 3.38 crores. stated to be out of shares capital and unsecured loan. The value of investment shown in the balance sheet. Thus, differs from the investments made as per information received. It is , therefore, held that the difference amount might have been made out of income not disclosed. The sources investments with reference to the actual cost of construction requires to investigation. Since there was substantial difference in investments. I have reason to believe that the assessee suppressed its true and correct income for which provisions of Section 147 of the I. T. Act,1961 is invoked. Issue notice U/S 148 of the I. T. Act, 1961 to the assessee. 4. An order of assessment dated 30.12.2011 was passed for both A.Y.2007-08 and 2008-09 in which the AO has recorded the fact that during the previous year relevant to A.Y.2007-08 and 2008-09 the assessee was engaged in the construction of residential hotel and that the assessee was also engaged in money lending, trading of sarees. The AO has also recorded the fact that duri ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... price at which the same acquired by them. If the shares' have finally been transferred in the names of the directors and/ or their relatives and / or to the concerns controlled by them, at prices which are substantially lower than the price at which the shares were acquired by the corporate shareholders, the capital should be held as bogus and added as undisclosed income of the assessee. To verify the transfer of shares the AD should also obtain copies of Annual Returns of the assessee filed with form No. 20B copies of Income Tax Returns and Audited Accounts and audited Financial Investments of the Shares Applicants for the following years and verify the same. The AO should also obtain copies of transfer deeds from the assessee. In case of any suspicion the AO may obtain certified copies of these documents from the ROC. The AD should pass the order within 6 months from the date of receipt of this order after providing the assessee a reasonable opportunity of being heard. The Range head must monitor the progress and line of investigation properly ensure justice to Revenue. 6. Aggrieved by the aforesaid order of CIT passed u/s 263 of the Act the assessee has pr ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he assessee can challenge the validity of an assessment order during the appellate proceedings pertaining to examination of validity of order passed u/s 263? 2. Whether the impugned assessment order passed u/s 143(3) dated 24-10-2013 was valid in the eyes of law or a nullity as has been claimed by the assessee? 3. If the impugned assessment order passed u/s 143(3) was illegal or nullity in the eyes of law, then, whether the CIT had a valid jurisdiction to pass the impugned order u/s 263 to revise the non est assessment order? 9. On question no. 1 and 3 which is relevant to the present case the Hon ble Mumbai bench of the Tribunal has taken the view that when the original assessment proceedings are null and void in the eyes of law for want of proper assumption of jurisdiction then such validity can be challenged even in collateral proceedings. The Mumbai bench took the view that the proceedings u/s 147 of the Act are primary proceedings and proceedings u/s 263 of the Act are collateral proceedings and in such collateral proceedings, the validity of initiation of the original proceedings u/s 147 of the Act can be challenged. The Mumbai bench of the Tribunal in this ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... hich went to the root of the matter. 19. While exercising powers u/s 263 Id. Commissioner cannot revise an assessment order which is non est in the eye of law because it would prejudice the right of assessee which has accrued in favour of assessee on account of its income being determined. If Id. Commissioner revises such an assessment order, then it would imply extending/ granting fresh limitation for passing fresh assessment order. It is settled law that by the action of the authorities the limitation cannot be extended. Because the provisions of limitation are provided in the same 20. In view of above discussion ground no.3 is allowed and revision order passed u/s 263 is quashed. 11. The learned DR relied on the order of the CIT(A). We have considered the rival submissions. We are of the view that the validity of the order u/s 147 of the Act depends upon the AO assuming jurisdiction to make an order of assessment u/s 147 of the Act after fulfilling the conditions laid down in the said section namely reason to believe the income chargeable to tax for that assessment year has escaped assessment. If this condition is not satisfied then it cannot be said the AO ha ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... tice u/s 133(6) of the Act, was duly shown as the investment in construction of hotel with the balance sheet of the assessee. The AO has however inferred that there is a difference in the value of investment in construction of hotel as shown in the books of account and as per the information in possession of the AO which is a sum of ₹ 4 crores. Another reason given by the AO is that the difference in the amount of investment in construction might have been met by the Assessee out of income not disclosed. It has also been mentioned that the source of investment with regard to the actual cost of construction requires investigation. 13. In this regard it can be seen that in its reply dated 26.07.2010 to the notice u/s 133(6) of the Act the assessee has given the following details :- Kindly refer to your above letter dated 18.06.2010 calling for information u/s. 133(6) of the Income Tax Act, 1961 Regarding investment in Hotel Ajoy Minar situated in Mandarmoni, Dist. - Purba Medinipur. As asked for, we are furnishing the information along with enclosures for your kind perusal.- I. Total Amount invested up to 31.03.2010 is ₹ 3,38,43,644.00 and source of f ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... to those reasons. No inference can be allowed to be drawn based on reasons not recorded. It is for the AO to disclose and open his mind through reasons recorded by him. He has to speak through his reasons. It is for the AO to reach to the conclusion as to whether there was failure on the part of the assessee to disclose fully and truly all material facts necessary for his assessment for the concerned assessment year. It is for the AO to form his opinion. It is for him to put his opinion on record in black and white. The reasons recorded should be clear and unambiguous and should not suffer from any vagueness. The reasons recorded must disclose his mind. Reasons are the manifestation of mind of the AO. The reasons recorded should be selfexplanatory and should not keep the assessee guessing for the reasons. Reasons provide link between conclusion and evidence. The reasons recorded must be based on evidence. The AO, in the event of challenge to the reasons, must be able to justify the same based on material available on record. He must disclose in the reasons as to which fact or material was not disclosed by the assessee fully and truly necessary for assessment of that assessment year ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 008 - 2009 proceedings, to find if there is an escapement of income. It was held that the scope of section 147 cannot encompass such an action under which certain examination is to be conducted for forming a reason to believe as to the escapement of income. If the facts of the present case including especially the reasons recorded by the Assessing Officer for reopening the assessment a reconsidered in the light of the decision of the Coordinate Bench of this Tribunal in the case of Deputy Director of income Tax (International Taxation)-21, Mumbai - vs.- Societe International De Telecommunication (supra), I am of the view that the initiation of reassessment proceeding itself was bad in law and the assessment completed by the Assessing Officer under section 143(3) read with section 147 in pursuance of such invalid initiation is liable to be cancelled. I order accordingly. 16. In the present case also the re-assessment proceedings have been initiated only for the purpose of verification and examination which is not the scope of reassessment proceedings. It would be the case of rather reasons to suspect rather than reasons to belief that there was escapement of income. It is a ca ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nts should be summoned to find out the genuineness of the transactions in the light of the share premium paid by them and also to see that if the subsequent transfer of shares by the share holders had lower price. 19. The ld. Counsel for the assessee submitted before us that the only grievance of the CIT in the impugned order was justification for a high premium. It was the submission that the justification of paying high premium on shares acquired was not necessary to be examined u/s 68 of the Act prior to introduction of first proviso to section 68 of the Act by the Finance Act 2012 w.e.f. 01.04.2013 whereby it has been provided that where the assessee is a company, (not being a company in which the public are substantially interested) and the sum so credited consists of share application money, share capital, share premium or any such amount by whatever name called, any explanation offered by such assessee-company shall be deemed to be not satisfactory, unless- (a) the person, being a resident in whose name such credit is recorded in the books of such company also offers an explanation about the nature and source of such sum so credited; and (b) such explanation in ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ese companies had filed their returns with nominal income. The AO mentioned in the assessment order that Inspector was deputed to verify fresh loans received during the year. The Inspector verified such loans and gave a positive report. Keeping such report on record, the AO accepted the genuineness of the transactions. The CIT invoked section 263 by observing that the report given by the Inspector was very elementary and simply mentioned that he had verified bank passbooks, Profit loss account and Balance sheets of these companies. In none of the reports, he had commented on the issue of credit worthiness of the parties. The CIT opined that the AO was required to make proper investigation to determine whether the loans were really made by the third parties or they had come out of the sources of the assessee himself. The Tribunal set aside the order u/s 263 of the Act by observing that the AO did conduct enquiry and: if there is an enquiry, even inadequate, that would not by itself give occasion to the ld. CIT to pass order u/s 263 of the Act. Setting aside the order passed by the Tribunal, the Hon ble jurisdictional High Court has laid down that : CIT had reasons to hold that ..... X X X X Extracts X X X X X X X X Extracts X X X X
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