TMI Blog2020 (3) TMI 963X X X X Extracts X X X X X X X X Extracts X X X X ..... e Revenue. Therefore, the condition precedent for usurping revisional jurisdiction u/s. 263 of the Act is absent and, therefore, the Ld. Pr. CIT lacked jurisdiction to assume second time revisional jurisdiction u/s. 263 of the Act. Therefore, the assessee succeeds on the legal issue raised and, therefore, on the facts and circumstances discussed (supra), we are inclined to quash the impugned order of Ld. Pr. CIT dated 14.03.2019. - Decided in favour of assessee. - I.T.A. No. 2179/Kol/2019 - - - Dated:- 20-3-2020 - Shri A. T. Varkey, JM And Dr. A.L. Saini, AM For the Appellant : Shri S. M. Surana, Advocate For the Respondent Shri A. K. Nayak, CIT, DR ORDER Per Shri A.T.Varkey, JM This appeal preferred by the assessee is against the second round of the action (i.e. second (2nd) exercise of revisionary jurisdiction u/s. 263 of the Income-tax Act, 1961 (hereinafter referred to as the Act ) by the Ld. Pr. CIT-4, Kolkata dated 14.03.2019 for AY 2012-13. 2. The facts in brief as noticed by the Ld. Pr. CIT in his impugned order is that in the instant case, the assessee company filed its return of income for the assessment year 2012- 13 on 15-01-2013 decl ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... out the money trail of the share capital. (vi) The A.O failed to adequately trace out the money trail to ascertain the genuineness of source of fund invested by share holders in the assessee company. (vii) On the whole the impugned order dated 11-06-2016 passed u/s. 263/143(3) of the Income Tax Act. 1961 prima facie suffers from lack of independent and adequate enquiry on the aforesaid issues. 3. And the Ld. Pr. CIT issued Show Cause Notice (SCN) to assessee and thereafter the Ld. Pr. CIT notes that the Ld. AR of the assessee appeared and filed written submission which he reproduced from page 3 to 11 and then the Ld. Pr. CIT did not accept the contention raised by the assessee and held at page 16 at para 6 of his impugned order as under: 6. I have carefully considered the submission of the assessee and perused the material available on record and found that the issue pointed out in the show cause needs verification. After having considered the position of law and facts and circumstances of the instant case, I am of the considered opinion that the assessment order passed by the AO is erroneous in so far as it is prejudicial to the interest of revenue in accor ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... dated 12.05.2016 of the original assessment order dated 25.03.2015 framed the re-assessment order dated 11.06.2016, wherein the AO held as under: 1. The case was examined by the Pr. CIT-4, Kolkata. The Pr. CIT-4, Kolkata has found that the assessment was made without making enquiries and verifications which would have been made and accordingly held that the assessment was erroneous in so far as prejudicial to the interest of revenue. The Pr. CIT-4, Kolkata has passed the order u/s. 263 on 12.05.2016 setting aside the assessment u/s. 143(3) dated 25.03.2015 with the direction to carry out proper examination of books of accounts and bank accounts of assessee as well as investors and also to examine the source of share application, identity of investor and its genuineness. 2. Accordingly, the case was taken up for fresh assessment. Summons u/s. 131 were issued in the names of directors of the investor companies and the assessee company to appear along with books of accounts and bank statements. 3. In compliance with the summons u/s. 131, the directors of the investor companies appeared personally along with the books of accounts and bank accounts. Statements of the d ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the issue before him. In the circumstances enumerated above only the order passed by the Assessing Officer can be termed as erroneous for the purpose of S.263 of the Act. Coming next to the second limb, the AO's erroneous order can be revised by the Ld. Pr. CIT only when it is shown that the said order is prejudicial to the interest of Revenue. When this aspect is examined one has to understand what is prejudicial to the interest of the revenue. The Hon'ble Supreme Court in the case of Malabar Industries (supra) held that this phrase i.e. prejudicial to the interest of the revenue'' has to be read in conjunction with an erroneous order passed by the Assessing Officer. The Hon ble Supreme Court, held that for invoking powers conferred by S.263 the Ld. Pr CIT should not only show that the AO's order is erroneous as a result of any of the situations enumerated above but CIT must also further show that as a result of an erroneous order, some loss is caused to the interest of the revenue. Their Lordship in the said judgment held that every loss of revenue as a consequence of an order of Assessing Officer cannot be treated as prejudicial to the interest of the rev ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ons to AO while framing the reassessment order vide para 4(ii) of his order. The specific directions of Ld Pr CIT to AO are as under: i) To carry out proper examination of the books of accounts and bank account of the assessee; ii) to carry out proper examination of the books of accounts and bank account of the investors; iii) AO to examine the source of the share applicants; iv) The AO to examine the identity of the investor and its genuineness; v) The AO to complete the assessment at the earliest without waiting for the time barring date. 9. In the second round before the AO for de novo re-assessment, the AO as per the specific direction of Ld. Pr. CIT (supra), conducted the reassessment proceeding. As per the specific direction of ld. Pr. CIT, the AO summoned the director of the assessee company before him, who duly appeared and produced the books of account on 27.06.2016 (refer page 293 of paper book) and furnished the relevant details viz., bank statements etc., which fact the AO has acknowledged in the reassessment order. We also note that the AO during the reassessment proceedings issued summons u/s. 131 of the Act to the directors of all shareholder ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Ltd. Ansh Dealtrade P. Ltd. Goodlife Sales P. Ltd. Kavya Suppliers P. Ltd. Reflect Commodeal P. Ltd. Remix Vanijya P. Ltd. Sangini Agencies P. Ltd. Welsome Dealers P. ltd. Sky View Tie Up P. Ltd. Page 41 of paper book Page 80 of paper book Page 99 of paper book Page 129 of paper book Page 157 of paper book Page 178 of paper book Page 204 of paper book Page 255 of paper book Page 230 of paper book ₹ 43,00,000/- (page 69 of PB) ₹ 20.50 crores (page 88 of PB) ₹ 20.85 crores (page 119 of PB) ₹ 51.90 crores (page 142 of PB) ₹ 51.80 crores (page 167 of PB) ₹ 56.15 crores (page 192 of PB) ₹ 46.86 crores (page 219 of PB) ₹ 21.08 crores (page 271 of PB) ₹ 47.59 crores (page 244 of PB) 11. So, from a perusal of the chart, we note that the assessee and the shareholders have brought to the notice of AO that they (share subscribers) have enough net wo ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... in respect of the specific direction given by the Ld. Pr. CIT dated 12.05.2016 while setting aside the original assessment order passed by the AO dated 25.03.2015. And in the impugned order the Ld. Pr. CIT has not found fault with the action of the AO in giving effect to the specific directions given by him while passing the first revisional order on 12.05.2016. Thus, we note that when the AO while framing the reassessment order pursuant to the specific direction of the Ld. Pr. CIT s order dated 12.05.2016 (first revisional order) has complied with the specific directions of Ld. Pr. CIT and based on the inquiry conducted and after perusal of the documents running more than 591 pages which reveals the identity, creditworthiness and genuineness of the share capital and premium collected by the assessee from the share subscribers, the satisfaction of AO as envisaged in sec. 68 of the Act is a plausible view and the share subscribers/directors participating in the reassessment proceedings along with the audited financial statements and other documents referred supra, the assessee had discharged the onus on it about the identity creditworthiness and genuineness of the share capital and ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... phraseology used in section 69 has held that in creating the legal fiction the phraseology employs the word may and not shall . Thus the un-satisfactoriness of the explanation does not and need not automatically result in deeming the amount credited in the books as the income of the assessee as held by the Supreme Court in the case of CIT v. Smt. P. K. Noorjahan [1999] 237 ITR 570. We note that against the said decision of Hon'ble Gujarat High Court the special leave petition filed by the Revenue has also been dismissed by the Hon'ble Apex Court. 14. So, with the aforesaid understanding of section 68 of the Act, let us examine whether the view of AO in the light of the investigation and results as discussed supra is a possible view and cannot be termed as un-sustainable view in law and facts. For that let us look at few case laws wherein the AO made additions of share capital and premium and when the aggrieved assessee s filed appeals before the Tribunal/High court/Supreme Court the Hon ble Courts have held that when the assessee discharges the onus on it in respect of the share subscribers identity, creditworthiness and genuineness then no addition u/s. 68 of the A ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ion money is received by the assessee- company from alleged bogus shareholders, whose names are given to the AO, then the Department is free to proceed to reopen their individual assessments in accordance with law. Hence, we find no infirmity with the impugned judgment. 17. We also rely on the decision of the Hon'ble Calcutta High Court while relying on the case of Lovely Exports, in the appeal of COMISSIONER OF INCOME TAX, KOLKATA12 IV Vs ROSEBERRY MERCANTILE (P) LTD., ITAT No. 241 of 2010 dated 10- 01-2011 has held: On the facts and in the circumstances of the case, Ld. CIT(A) ought to have upheld the assessment order as the transaction entered into by the assessee was a scheme for laundering black money into white money or accounted money and the Ld. CIT (A) ought to have held that the assessee had not established the genuineness of the transaction. It appears from the record that in the assessment proceedings it was noticed that the assessee company during the year under consideration had brought ₹ 4, 00, 000/- and ₹ 20,00,000/- towards share capital and share premium respectively amounting to ₹ 24,00, 000/- from four shareholders being ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... sessee company and as such the addition made by the Assessing Officer under Section 68 of the Act was wrong. The learned Commissioner of Income Tax (Appeals) after hearing the department and the Assessee Company deleted the addition of ₹ 52, 03,500/- to the income of the assessee company during the Assessment Year in question. The learned Commissioner of Income Tax Appeals found that there were as many as 2155 allottees, whose names, addresses and respective shares allocation had been disclosed. The Commissioner of Income Tax Appeals, further found that the Assessee Company received the applications through bankers to the issue, who had been appointed under the guidelines of the Stock Exchange and the Assessee Company had been allotted shares on the basis of allotment approved by the Stock Exchange. The Assessee Company had duly filed the return of allotment with the Registrar of Companies, giving complete particulars of the allottees. The Commissioner of Income Tax (Appeals) found that inquires had confirmed the existence of most of the shareholders at the addresses intimated to the Assessing Officer, but the Assessing Officer took the view that their inves ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... years after the allotment. By an order dated 2nd May, 2001, this Court admitted the appeal on three questions which essentially centre around the question of whether the Appellate Commissioner erred in law in deleting the addition of ₹ 52, 03, 500/- to the income of the assessee as made by the Assessing Officer. We are of the view that there is no question of law involved in this appeal far less any substantial question of law. The learned Tribunal has concurred with the learned Commissioner on facts and found that there were materials to show that the assessee had disclosed the particulars of the shareholders. The factual findings cannot be interfered with, in appeal. We are of the view that once the identity and other relevant particulars of shareholders are disclosed, it is for those shareholders to explain the source of their funds and not for the assessee company to show wherefrom these shareholders obtained funds. 19. We also rely on the decision of the Hon'ble High Court, Calcutta in the case of Commissioner of Income Tax vs M/s. Leonard Commercial (P) Ltd on 13 June, 2011 in ITAT NO 114 of 2011 wherein the Court held as follows: The only q ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... substantial question of law. 20. So, in the light of the case laws discussed supra, we find that in the case in hand and from the details as discussed (supra) which emerges from the paper book filed before us as well as before the lower authorities, it is vivid that all the share applicants are (i) income tax assessee s, (ii) they are filing their return of income, (iii) the share application form and allotment letter is available on record, (iv) the share application money was made by account payee cheques, (v) the details of the bank accounts belonging to the share applicants and their bank statements, (vi) in none of the transactions the AO found deposit in cash before issuing cheques to the assessee company, (vii) the applicants are having substantial creditworthiness which is represented by a capital and reserve as noted above, consequently we find that AO s view is a plausible view. 21. As noted from the judicial precedents cited above and even at the cost of repetition, we note that as per section 68 of the Act, where any sum is found credited in the books of an assessee then there is a duty casted upon the assessee to explain the nature and source of credit found ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... and perused the materials available on record including the detailed paper book filed by the assessee. The facts stated hereinabove remain undisputed are not reiterated herein for the sake of brevity. We find that the assessee had given the complete details about the share applicants clearly establishing their identity, creditworthiness and genuineness of transaction proved beyond doubt and had duly discharged its onus in full. Nothing prevented the Learned AO to make enquiries from the assessing officers of the concerned share applicants for which every details were very much made available to him by the assessee. We find that the reliance placed by the Learned Ld. CIT(1) on the decision of the Hon'ble Apex Court in the case of CIT vs Lovely Exports (P) Ud reported in (2008) 216 CTR 195 (SC) is very well founded, wherein, it has been very clearly held that the only obligation of the company receiving the share application money is to prove the existence of the shareholders and for which the assessee had discharged the onus of proving their existence and also the source of share application money received. 3.4. 1. We also find that the impugned issue is also covered by th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ets of all the shareholders. The Learned AO on analyzing all the balance sheets observed that the shareholders have paltry income and small savings and none of them have any bank account and huge cash balances were shown in their hands out of which Pay orders were obtained. Based on this, the Learned AO concluded that these shareholders do not have creditworthiness to invest in the assessee company and brought the entire sum of ₹ 57,00,000/- to tax as unexplained cash credit u/s 68 of the Act. 4.2. On first appeal, the Learned CIT(A) observed that entire share application monies of ₹ 57,00,000/- we received during the previous year 2004-05 relevant to Asst Year 2005-06 from 20 persons and the shares were allotted to them during the asst year under appeal. He observed that the assessee had furnished details of the share applicants giving the date wise receipts, mode of payment, amount, name, address, income tax returns, PA No. of share applicants along with their balance sheet. The Learned CITA also observed that the assessee in its reply to show cause notice before the Learned AO had requested him to use his power and authority for the physical appearance of the s ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... The ITAT Kolkata in R.B Horticulture Animal Projects Co. Ltd, ITA No. 632/Koll2011 dated 13-01-2016. In this the decision the Ld. Tribunal held as follows: 6. We have heard the Learned DR and when the case was called on for hearing , none was present on behalf of the assessee. However, we find from the file that the assessee had filed a detailed paper book and written submissions. Hence the case is disposed off based on the arguments of the Learned DR and written submissions and paper book already available on record. The facts stated in the Learned CIT(A) were not controverted by the Learned DR before us. We find that the assessee had given the complete details about the share applicants clearly establishing their identity, creditworthiness and genuineness of transaction proved beyond doubt and had duly discharged its onus in full. Nothing prevented the Learned AO to make enquiries from the assessing officers of the concerned share applicants for which every details were very much made available to him by the assessee. We find that the reliance placed by the Learned CITA on the decision of the Hon'ble Apex Court in the case of CIT vs Lovelv Exports (p) Ltd reported in ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... appeal: Held, dismissing the appeal, that the additional burden was on the department to show that even if the share applicants did not have the means to make the investment, the investment made by them actually emanated from the coffers of the assessee so as to enable it to be treated as the undisclosed income of the assessee. No substantial question of law arose. 6.3. We find that the argument of the Learned DR to set aside this issue to the file of the Learned AO for verification of share subscribers would not serve any purpose as the ratio decided in the above cases is that in any case, no addition could be made in the hands of the recipient assessee. In view of the aforesaid findings and respectfully following the decision of the apex court (supra), Jurisdictional High Court (supra) and Delhi High Court (supra) , we find no infirmity in the order of the Learned CIT(A) and accordingly, the grounds raised by the Revenue are dismissed. (c) The ITAT Kolkata in ITA No.1061/Ko1/2012 in the case of ITO Wd.3(2) Kol, vs. M/s. Steel Emporium Ltd dated 05-02-2016. In this the decision the Ld. Tribunal held as follows: 10. We have heard both the rival parties and ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Company applicants also to explain the alleged discrepancy in the address. The AO has not brought any material on account of record to disbelief the evidences furnished with him and treat the transaction as not genuine. The assessee submitted the following material at the time of assessment. a) Copy of share applications from the share applicants (copies enclosed) b) Copy of Form 2 filed with Registrar of Companies, West Bengal (copy enclosed) c) Copy of Form 18 about the Registered Office of the applicants for change of address subsequent to the date of allotment, i.e. 31.03.2009 (copies enclosed) d) Members register e) Share application Allotment Register f) Copy of board resolution. g) Replies from Share applicants to the notice u/s. 133(6) issued to them by the AO seeking information and documents about the sources and to examine their identity, genuineness of the transaction and their creditworthiness. (copy enclosed). h) Copy of audited accounts. i) Copy of bank statements. j) Copy of Income tax acknowledgment of return filed for AY 2009- k) Copy of PAN Card. l) Details of sources of funds. m) Co ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s of their return of income and financial statements for as well as copy of their assessment order u/s. 143(3) of the I. T Act for AY 2005-06. In the case of M/s. Jewellock Trexim Pvt. Ltd. the assessment for AY 2005-06 was completed by the ITO Ward 9(3), Kolkata and the assessments in the case of M/s. Navalco Commodities Pvt. Ltd. and M/s. Shree Shyam Trexim Pvt. Ltd. for A. Y.2005-06 and AY.2004-05 respectively were completed by the I TO, Ward 9(4), Kolkata. Under the circumstances, I am of the opinion that the AO was not justified in holding that the share applicant companies were not in existence. The assessment orders were completed on the address as provided by the appellant company in the course of assessment proceedings. It is not known as to how the AO's inspector had reported that the aforesaid companies were not in existence at the given address. Since the appellant company had provided sufficient documentary evidences in support of its claim of receipt of share application money, I am of the opinion that the no addition u/s.68 could be made in the hands of appellant company. On going through the various judicial pronouncements relied upon by the appellant, it is obs ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... us, in the light of the judicial precedents of the Hon ble Apex/High court/Tribunal, we are of the view that the action/view taken by the AO after enquiry made by him as per the direction of the Ld. Pr. CIT in the set aside proceedings dated 12.05.2016 pursuant to which the AO has reassessed the assessee after inquiry and accepted the share capital and premium collected by assessee is a plausible view and cannot be held to be unsustainable view in facts or law, therefore, the impugned action of the Ld. Pr. CIT to interfere with the reassessment order of the AO, is without jurisdiction and liable to be quashed. 24. Therefore, in the light of the discussion on fact as well as on law, we are of the considered opinion that AO s action (reassessment) pursuant to the first revisional order of Ld. Pr. CIT dated 12.05.2016, to accept the share capital and premium as a possible view in facts and law as per the ratio laid by the Hon ble Supreme Court in Malabar Industrial Co. Ltd. Vs. CIT 243 ITR 83 (SC) the AO s action/reassessment order cannot be termed as erroneous and prejudicial to the interest of the Revenue. Therefore, the condition precedent for usurping revisional jurisdiction u ..... 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