TMI Blog2018 (12) TMI 575X X X X Extracts X X X X X X X X Extracts X X X X ..... e. It is not a case where any infirmity has been pointed out in the documents submitted by the assessee or for that matter, the huge share premium has not been justified. If that be the case then of course, the satisfaction of the Assessing Officer could not said to be reasonable and definitely in such a case the enquiry of the AO would have been clearly deficient. That exactly is the fact and situation in which the Hon'ble Apex Court and various other courts have upheld the order passed u/s 263 of the Pr. CIT in various cases cited by the Revenue before us. But in the present case, the identity, the genuineness and even the share premium received has been established and justified. No reason remains for doubting the transaction. CIT has rested his case for more inquiry in the matter, merely on the basis of suspicion that the transaction may be tainted. This we hold, cannot be the basis for holding the enquiry conducted by the AO as insufficient and the order consequently passed as erroneous for the purpose of assuming jurisdiction u/s 263 of the Act. - Decided in favour of assessee. - ITA No.1514/Chd/2017 - - - Dated:- 5-12-2018 - Smt. Diva Singh, JM And Smt. Annapurna ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... mprising of share capital of ₹ 1.18 crore and share premium of ₹ 9.64 crores from a company, namely, M/s Pacatolus SPV5, 4 floor, Raffles Tower, 19 Cyber city, Ebene, Mauritius, which is a resident of Mauritius. During the assessment proceedings, the assessee had submitted the following information/documents in support of receipt of investment from Mauritius Company;- a) Name and address of the investor b) Mode of receipt of share capital and share premium by the assessee company from the Mauritian investor. c) Copy of form No. 2 filed by the assessee company with ROC for allotment of aforesaid equity share capital to Mauritius Investor. d) Copy of share certificate issued to the investor. e) Copy of FIRC issued by the remitting bank i.e. Hong Kong and Shanghai Banking Corporation Ltd. i.e. HSBC Mumbai. f) Copy of FCGPR submitted to RBI regarding the above investment along with its supporting documents. g) Copy of certificate of Incorporation of Investor company. h) Copy of Tax Residency Certificate issued by Mauritius revenue authority (i) However, the AO did not ask for the establishment of credibility of the company from ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... from the records of the assessee that proper enquiries had been conducted by the AO during assessment proceedings. But, it was pointed out, that the Ld.Pr.CIT held that the same was not sufficient since as per the Ld. Pr.CIT, the AO should have inquired into the credibility of the company and also whether the said investor company actually existed or not. Ld.Counsel stated that the reason for the Ld.Pr.CIT holding so was the information in his possession, from the White Paper on Black Money published by the Finance Ministry in May 2012, that black money originated in India was returning through various routes from outside India by hawala, GDRs participatory notes , FDI etc. Our attention was drawn to the findings of the Ld. Pr.CIT at para 4 of the order as under: I have carefully considered assessee's submissions which are not acceptable on the issue that Assessing Officer has failed to examine the issue of share premium properly as the Large Share Premium received was the one of the reason for selection of assessee's case for scrutiny through CASS. The assessee company has received during the previous year 2012-13. Foreign Direct Investment (FDI) of ₹ 10.82 cr ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... company which has invested in India. This issue completely remained unattended by the A.O. It is evident that the assessment has been completed in this case without application of mind by the A.O.in the assessee company. A.O. did not bother to examine this issue. It was failure on the part of A.O. in the eyes of law. With regard to the issues discussed above, A.O. has accepted the replies furnished by the assessee without any verification / investigation / enquiries. It is a failure on his part in the eyes of law. It is evident that the assessment order passed by the A.O. without making inquiries/verifications and investigations. A.O. miserably failed to look into these issues and framed assessment without application of mind. A.O. has simply relied upon whatever submissions have been made by the assessee and accepted them. The A.O. failed to make independent enquiries/verifications/investigations while framing the assessment but he failed to do so and framed assessment without application of mind. 5. Ld. Counsel for the assessee thereafter demonstrated before us that due and proper inquiries were conducted by the AO regarding the impugned issue. Our attention was drawn t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... dia. The process of receiving Foreign Direct Investment in India and the related formalities is explained as under:- First of all a Certificate of Foreign Inward Remittance (FIRC) is issued by the remitting bank which in our case is Hongkong and Shanghai Banking Corporation Limited (HSBC), Mumbai. A copy of this certificate is enclosed as per Annexure A. A perusal of this certificate shows that it has full details about the remitter and the recipient which includes:- (a)Name of the both party (b)Their address (c)Amount remitted (d)Bank account details of both the parties (e) Purpose for which this money has been remitted Subsequent to the receipt of this certificate the recipient i.e Colors Textiles Limited (assessee company) had a statutory obligation to file full details of the remittance to Reserve Bank of India in duly prescribed annexure V VI along with the copy of FIRC This form also has all the details of investor. A copy of the letter along with all the annexures and supports, filed with Reserve Bank of India is placed on record as per Annexure B. On receipt of this letter Reserve Bank of India gives a certificate and assigns a DIN ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ove investment along with its supporting documents. Copy of certificate of Incorporation of Investor company. Copy of Tax Residency Certificate issued by Mauritius revenue authority Copy of certificate issued by Chartered Accountant certifying the fair value of shares /premium at which shares were issued to the Mauritian Company It was contended that the above adequately proved the genuineness of the transaction and the AO had duly considered/ examined and being satisfied with the same had made no further enquiries. 7. Ld.Counsel for the assessee contended that the view of the AO was plausible also since in the case of Lotus Integrated Texpark Limited, a company with which the assessee company got subsequently amalgamated, addition on account of share capital issued to a Mauritian company for identical reasons of not establishing its credibility and identity, was made in the preceding years, i.e. A.Y. 2010-11 2011-12, which was deleted by the ITAT. It was pointed out that identical documents were filed in that case also by the assessee in discharge of onus to establish the genuineness of the transaction, which were found sufficient by the ITAT for esta ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... pany has also issued a confirmatory letter in favour of the assessee certifying that M/s Glacis Investment Limited has invested ₹ 3,70,00,000/- for allotment of 740000 equity shares in assessment year under appeal. The Republic of Mauritius also certified that Global Business License under Financial Services Act have been granted to M/s Glacis Investment Limited. The balance sheet of the shareholder company M/s Glacis Investment Limited is also filed on record which is admitted as additional evidence which proved that the principal activity of this company is that of investment holding and was having the sufficient funds/assets to make investment in assessee company and that the investment made in assessee company have been certified in the balance sheet. The bank statement of the assessee is also filed on record which support the contention of the assessee that ₹ 3,70,00,000/- have been invested by shareholder company in assessee company through transfer entries i.e. banking channels. The decisions relied upon by Id. counsel for the assessee clearly support the contention of the assessee that assessee has proved the credit worthiness of the shareholder company and genu ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... assessee alongwith evidences was sufficient to satisfy about the genuineness of the transaction and the Ld.Pr.CIT had erred in stating that proper and adequate enquiries had not been conducted in the present case. Ld. counsel for the assessee stated that in the above facts circumstances the order passed by the AO could not be held to be erroneous so as to cause prejudice to the Revenue and the assumption of jurisdiction by the Ld.Pr.CIT, u/s 263 of the Act to revise the order of the AO was therefore not as per law. Reliance was placed by the Ld. counsel for the assessee on the following case laws in support of the above contention: 1. Commissioner of Income Tax vs Hindustan Marketing Advertising Co. Ltd. (2012) 341 ITR 180(Delhi) 2. Commissioner of Income Tax vs Anil Kumar Sharma (2011) 335 ITR 83(Delhi) 3. Commissioner of Income Tax vs Sunbeam Auto Limited (2011) 332 ITR 167(Delhi) 4. Commissioner of Income Tax vs Deepak Mittal (2010) 324 ITR 411(Punjab and Haryana) It was also contended that in the present case the Ld.Pr. CIT had only expressed the view that the AO should have conducted the inquiry in a particular manner ,without himself conducting any ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... t conducting any enquiry or verification in order to establish that the A.O. is not sustainable in law since such an interpretation will lead to unending litigation and there would not be any point of finality in the legal proceedings. The opinion of the Commissioner referred to in section 263 of the Act has to be understood as legal and judicious opinion and not arbitrary opinion. 3. Indian Farmers Fertilizers Cooperative Limited vs The Pr.CIT-11 in ITA No.2487/Del/2016. 10. Our attention was specifically drawn to the relevant portion of the order of the Hon ble High Court affirming the findings of the Tribunal that where it has been found that detailed inquiries have been held by the AO, the order cannot be held to be erroneous or prejudicial to the interest of the Revenue under Explanation 2 to section 263 of the Act, as under: 17. Before concluding we would also like to deal with the recent insertion of Explanation 2 to Section 263 of the Act. We have already held above that in respect of both the issues i.e. allowing credit of deemed taxes paid on dividend in Oman as well as capitalization of interest u/s 36(1)(iii) detailed enquiries as well verification have ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e source of source was required to be explained and since in the present case the same had been received from a non-resident company the onus was not on the assessee to explain the source of the source. Therefore Ld. counsel for the assessee contended that the Ld.Pr.CIT had erred in holding the order of the AO erroneous on account of the fact that he had not looked into the source of source of the investment made by the Mauritius company. Ld. DR on the other hand pointed out from the order of the Ld.Pr. CIT itself that the case was selected for scrutiny through CASS for the reasons which included large share premium received by the assessee. Ld. DR pointed out that the Ld. Pr. CIT had adequately pointed out how sufficient and proper enquiries had not been made by the AO in this regard and therefore the order passed by the AO had been rightly held to be erroneous so as to cause prejudice to the interest of the revenue. Ld.DR also drew our attention to the findings of the Ld.Pr.CIT with regard to the White Paper on black money published in May 2012 by the Finance Ministry identifying various routes through which black money originated in India is returned to India and which included ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... to be erroneous for the above reason only. But considering the facts of the case and the discussion by the Ld.Pr.CIT in the order, we are not convinced that the inquiry conducted by the AO was inadequate. 16. As per the Ld. Pr CIT the issue of share capital introduced during the year from a company M/s. Pacatolus SPV 5, MAURITIUS comprising of share capital 1.18 crores and share premium of 9.6 crores was not sufficiently/adequately examined by the AO. The specific charge against the AO viz-a-viz the inadequacy of enquiry was that the AO did not bother to ask the assessee for establishing the credibility of the company nor did he make enquiry of the same from the Mauritius Taxation authority and further that the AO failed to enquiry whether the said company actually existed or not. Admittedly, the following documents/information viz-a-viz the share capital so introduced during the year had been filed by the assessee before the AO: Name and address of the investor Mode of receipt of share capital and share premium by the assessee company from the Mauritian investor. Copy of form No. 2 filed by the assessee company with ROC for allotment of aforesaid equity sh ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... action, that it had invested in share capital of the assessee company and also the justification for the premium. No infirmity has been pointed out in the above documents by the Ld.Pr.CIT. With all the above documents found to be in order, the AO, we hold, was rightly satisfied with the genuineness of the share capital received and we do not find any reason for the AO to have made any further inquiry regarding the investor company. As pointed out by the Ld.Counsel for the assessee, the ITAT had held identical documents filed as sufficient for establishing genuineness of share application money received by Lotus Integrated Taxpark Ltd., a company with which the assessee company got amalgamated subsequently, from a Mauritius company in preceding years, and deleted addition made on account of share capital for identical reasons that its identity and credibility was not adequately established. The view taken by the AO, in being sufficiently satisfied about the genuineness of the share capital received from the Mauritian company, can without any doubt therefore be said to be a plausible view. The Ld.Pr.CIT, we find, in the present case has sought to therefore impose his view regardin ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... picion cannot be the basis for rejecting the information and documents filed by the assessee and holding them to be insufficient for establishing the genuineness of the transaction. The inquiry conducted by the AO cannot be termed inadequate merely because the Ld.Pr.CIT suspected the transaction to be tainted. It is settled law that jurisdiction u/s 263 for revising order of the AO cannot be assumed for making further inquiries. There has to be a definite finding of error based on material evidences and not on suspicion. The Ld. Pr.CIT has to come to the conclusion and himself decide that the order is erroneous, by conducting necessary inquiries, if required and necessary, before the order u/s 263 is passed. The Commissioner cannot remand the matter to the AO to decide whether the findings recorded are erroneous. 19. Further, since we have held that adequate inquiries were conducted by the AO regarding the share capital received from the Mauritius company, the order cannot be said to be erroneous even as per Explanation 2 to section 263. Also, as rightly pointed out by the Ld.Counsel for the assessee, the ITAT ,in the case of Narayan Tatu Rane(supra) has held that the said ex ..... X X X X Extracts X X X X X X X X Extracts X X X X
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