TMI Blog2021 (4) TMI 243X X X X Extracts X X X X X X X X Extracts X X X X ..... applicants, so creditworthiness is proved. Even if there was any doubt if any regarding the creditworthiness of the share applicants was still subsisting, then AO should have made enquiries from the AO of the share subscribers as held by Hon'ble jurisdictional High Court in CIT vs DATAWARE [ 2011 (9) TMI 175 - CALCUTTA HIGH COURT] which has not been done, so no adverse view could have been drawn. Third ingredient is genuineness of the transactions, for which we note that the monies have been directly paid to the assessee company by account payee cheques out of sufficient bank balances available in their bank accounts on behalf of the share applicants. The share applicants have confirmed the share application in response to the notice u/s. 133(6)of the Act and have also confirmed the payments which are duly corroborated with their respective bank statements and all the payments are by account payee cheques. Thus the assessee has discharged the onus on it; and the AO enquired about it during the reassessment after reopening proceeding for this issue and it has been thoroughly enquired as discussed supra and the view taken by AO is a plausible view in line with the judicial ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... eassessment order which he proposes to interfere with is erroneous as well as prejudicial to the interest of revenue as stipulated in section 263 of the Act. According to Ld. A.R, the Ld. PCIT has miserably failed to bring out in the impugned order/show-cause notice (SCN) as to how the AO's reassessment order u/s. 147/143(3) of the Act dated 29.12.2017 for AY 2010-11 is erroneous as well as prejudicial to the revenue. According to Ld. A.R, the Ld. PCIT has expressed his desire to exercise his revisional jurisdiction by issuing show-cause notice (SCN) dated 22.01.2020 which is reproduced as under: Related to the Assessment year 2010-11, your case was completed u/s. 147/143(3) of the Income Tax Act, 1961 on 29/12/2017 at an assessed income of ₹ 29,420/- against the returned income of ₹ 29,420/-. The assessment order was passed without making any additions. In order to judge the merit of the order passed by the Assessing Officer, the assessment records were perused. The records available revealed that the Identity, creditworthiness genuineness of transaction relating to share capital of ₹ 20,00,000/- and share premium amounting to ₹ 80,00,000/- ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... or re-opening the assessment proceedings u/s. 147 for the AY 2010-11-Matter regarding Ref: Your letter dated 28.04.2017 Please refer to the above. On the basis of information received from ADIT (Investigation), Unit-2(4), Kolkata it is found that a group led by Shri Kumar Om Prakash and his associates were involved in the business of Real Estates and other related activities in Howrah. As per the information, received from ADIT(Inv) that one of the key persons and entities of the said group is M/s. ACS Traders Pvt. Ltd. as 7, Dr. Abani Dutta Road, Howrah-711106. In view of the Income Tax Act, 1961, the group has raised share capital from dubious and shell companies and this capital raised is nothing but unaccounted cash of the group, reported by the Investigation Wing. M/s. ACS Traders having PAN-AAHCA 0919 L during the FY 2009-10 relevant to the AY 2010-11 raised capital of ₹ 1,00,00,000/- (as per data base information of shell companies as detailed.) In this regard, further investigation for the creditworthiness/genuineness/proof of identity of such shares capital (transaction of the allottee) would be required as per provision of the Income Tax Act, 196 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... face value @ ₹ 10: a) Name of applicant along with mailing address b) PAN of the share applicants - (seven) c) Allotment description with copy of share application form d) Board Resolution -(Seven) e) ITR acknowledgement of all the share applicants (seven) (PB-Page 364-376) f) Bank statements reflecting transaction (seven) g) Copy of certificate of incorporation of share applicant (seven) h) Copy of source of fund i) Coy of audited Financial statement for FY 2009-10 (seven) 7. Still not satisfied by the submission of the aforesaid documents, according to Ld. A.R, further enquiries were made by the AO which was replied by letter dated 12.12.2017 (refer page 64-71) and the assessee filed the following documents also: (i) Copy of company master data of all applicants (DIN, CIN, Company status, name of directors) (ii) Copy of ledger of sales and purchase and loan and advance. 8. Further it was brought to our notice that AO had issued notice u/s. 133(6)of the Act to all the seven (7) share applicants dated 13.12.2017 and (after receiving their replies refer page 72-74 of PB) which three (3) replies are found placed in P ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he share applicants; and based on all the documents/materials collected in that process, the AO in the re-assessment order after re-opening the assessment, has accepted the identity, creditworthiness and genuinity of the seven (7) share subscribers and the transaction of share capital premium to the tune of ₹ 1 crore in the hands of the assessee company for AY 2010-11. In the light of the aforesaid facts, according to Ld. A.R, the Ld. PCIT's finding in the impugned order that no enquiry was conducted by the AO while passing the re-assessment order dated 29/12/2017 is ex-facie erroneous and for that he drew our attention to page no. 4 of the Ld. PCIT's impugned order dated 03.06.2020 wherein the Ld. PCIT has made a finding .......... The claim of the assessee was found to be destitute of merit as the records clearly demonstrated that the AO made assessment u/s. 143(3)/147 dated 29.12.2017 without carrying out any inquiries .............. Further according to the Ld. A.R, the faults of the AO taken note by the Ld. PCIT to interfere/exercise his revisional jurisdiction u/s. 263 is that despite there being specific information from the Investigation Wing of the Depart ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... r under consideration i.e. AY 2010-11, as per law in force for this assessment year is concerned, the assessee was not required to prove the 'source of source' of the share capital collected of ₹ 1 crore, which requirement of law was only from the assessment year i.e. AY 2013-14 onwards. And therefore the assessee in this assessment year i.e. AY 2010-11 was not duty bound to ask the source of source from the share-subscribers about share-capital subscribed by it. According to Ld. A.R, as per the law applicable for AY 2010-11, the assessee had discharged the onus by sharing the documents which revealed the source of the share capital and the AO had examined the truth/veracity of the same by independently verifying it by issue of notice u/s. 133(6) and by examining the replies to it from the share-subscribers and finding nothing dubious/bogus in the transaction (share), the AO has accepted the same. By doing so, according to Ld. A.R, the AO has discharged his duty as an investigator and adjudicator in accordance to law applicable for AY 2010-11. According to him, the Ld. PCIT by issuing SCN on 31.01.2020 has not appreciated the legal position in respect of AY 2010-11 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... y. According to Ld. CIT D.R, the AO failed to enquire on the issue for which re-opening was made and therefore the order of re-assessment passed by AO was erroneous for want of enquiry; and therefore the Ld. PCIT rightly interfered by invoking his revisional jurisdiction u/s. 263 of the Act; and thereafter he drew our attention to page nos. 4, 5 and 6 of the impugned order and contended that the Ld. PCIT had satisfied the condition precedent to invoke the jurisdiction u/s. 263 of the Act. Therefore, he prays that this Tribunal should not interfere with the impugned order of Ld. PCIT. 9. We have heard both the parties and perused the records. Before we advert to the facts and law involved in this lis before us, let us revise the law governing the issue before us. The assessee has challenged in the first place, the very usurpation of jurisdiction by Ld. Principal CIT to invoke his revisional powers enjoyed u/s. 263 of the Act. Therefore, first we have to see whether the requisite jurisdiction necessary to assume revisional jurisdiction is there existing before the Ld. Pr. CIT to exercise his power. For that, we have to examine as to whether in the first place the order of the Asse ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ase, whether the Ld. PCIT had successfully usurped the revisional jurisdiction to interfere with the re-assessment order passed by the AO dated 29.12.2017. In this regard we note that the assessee company was established in the year 2007-08 for trading of Hosiery goods Katha (Catechu) and it originally filed its return of income for AY 2010-11 on 20.09.2010 declaring ₹ 29,420/- and the return was processed u/s. 143(1) of the Act. Thereafter the assessee's case was reopened by the AO u/s. 147 of the Act by issuing notice u/s. 148 of the Act on 29.03.2017 by recording reasons on 27.03.2017 which fact is noticed from the order sheet placed at page 95 96 of PB. It is noted that the reasons for reopening was given to the assessee by the AO vide letter dated 24.11.2017 which is found placed at Page 94 of the PB (supra). From a perusal of the reasons recorded it is discerned that the AO received information that the assessee company has raised share capital of ₹ 1 crore from dubious shell companies which is nothing but assessee's own money. According to AO, this incriminating fact was discovered after he got the information from ADIT(Investigation) which fact need ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ice 133(6) of the Act, to the seven share subscribers and after crosschecking the veracity of the documents filed by the assessee, the AO was pleased to accept the identity, creditworthiness and genuineness of the share capital of ₹ 1 crore. It is noted all the seven entities have furnished their respect CIN DIN numbers, registered addresses, email-ID, and their respective status of these companies are shown as active which fact can be seen from a perusal of company Master Data (refer Page 64 to 71 of PB). We find that share subscribers have replied to the AO pursuant to notice issued u/s. 133(6) of the Act which is found placed at page 4-71 of PB. From a perusal of the same, the following details along with supporting documents were filed respectively by them directly to the AO (i) PAN (ii) Assessing Ward (iii) details of share (iv) copy of ITR (v) copy of audited Balance sheet and P L account (vi) copy of bank statement (vii) share allotment advice (viii) Allotment letter of shares specifying distinction numbers of share so allotted. In the light of the aforesaid enquires documents furnished by them, and after examining the director of assessee company on oath u/s. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he share transaction, which action of AO cannot be termed as a case of no-enquiry as incorrectly held by the Ld. PCIT. To sum up we find that after processing the return of income of the assessee u/s. 143(1) of the Act the AO re-opened the same by recording the reason (supra) and it is noted from the reason to re-open was precisely for the same reason i.e. [on which issue the Ld. PCIT in the impugned order concluded that the AO failed to enquire on the issue i.e. share capital ₹ 1 crore]. The AO in the 'reasons recorded' had expressed his desire to re-open on the very same issue i.e. share capital of ₹ 1 crore and which was the factual basis for forming a belief about the escapement of income, which fact is clearly discernible for 'reasons recorded' to reopen (supra) itself. And we find that after re-opening, the AO has enquired by issuing notice u/s. 133(6) directly to the seven share applicants which were replied by them directly to AO; and on summons u/s. 131 of the Act, the assessee company's director had appeared before the AO and his statement was recorded under oath by AO u/s. 131 of the Act. And all the seven share subscriber are Income Tax a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he onus by placing (i) confirmation letters of the cash creditors; (ii) their affidavits; (iii) their full addresses and GIR numbers and permanent account numbers. It has found that the assessee's burden stood discharged and so, no addition to his total income on account of cash credit was called for. In view of this finding, we find that the Tribunal was right in reversing the order of the AA C, setting aside the assessment order. 16. Our attention was also drawn to the decision of the Hon'ble Supreme Court while dismissing SLP in the case of Lovely Exports as has been reported as judgment delivered by the CTR at 216 CTR 295: Can the amount of share money be regarded as undisclosed income under section 68 of the Income tax Act, 1961? We find no merit in this special leave petition for the simple reason that if the share application 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. Our attention was also drawn to the decision of the Hon'ble ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... cision of the Hon'ble High Court, Calcutta in the case of Commissioner of Income Tax vs M/s. Nishan Indo Commerce Ltd. dated 2 December, 2013 in INCOME TAX APPEAL NO. 52 OF 2001 wherein the Court held as follows: The Assessing Officer was of the view that the increase in share capital by ₹ 52,03,500/- was nothing but the introduction of the assessee's own undisclosed funds/income into the books of accounts of the assessee company. The Assessing Officer accordingly treated the investment as unexplained credit under Section 68 of the Income Tax Act and added the same to the income of the assessee. Being aggrieved, the assessee filed an appeal before the Commissioner of Income Tax (Appeals) being the First Appellate Authority and contended that the Assessing Officer had no material to show that the share capital was the income of the assessee 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 qu ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ench of this Court held that when Section 68 is resorted to, it is incumbent on the assessee company to prove and establish the identity of the subscribers, their credit worthiness and the genuineness of the transaction. The aforesaid judgment was rendered in the context of the factual background of the aforesaid case where, despite several opportunities being given to the assessee, nothing was disclosed about the identity of the shareholders. In the instant case, the assessee disclosed the identity and address and particulars of share allocation of the shareholders. It was also found on the facts that all the shareholders were in existence. Only nine shareholders subscribing to about 900 shares out of 6,12,000 shares were not found available at their addresses, and that too, in course of assessment proceedings in the year 1994, i.e., almost 3 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 vi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... sing Officer has not adopted either of the aforesaid courses but has simply blamed the assessee for not producing those share applicants. In our view, in the case before us so long the Assessing Officer was unable to arrive at a finding that the particulars given by the assessee were false, there was no scope of adding those money under section 68 of the Income- tax Act and the Tribunal below rightly held that the onus was validly discharged. We, thus, find that both the authorities below, on consideration of the materials on record, rightly applied the correct law which are required to be applied in the facts of the present case and, thus, we do not find any reason to interfere with the concurrent findings of fact based on materials on record. The appeal is, thus, devoid of any substance and is dismissed summarily as it does not involve any substantial question of law. 20. As noted from the judicial precedents cited above, 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 in his books, when called upon by the AO to do so. In the instant case, the credit is in ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... y before accepting the share subscribers identity, creditworthiness and genuineness of the transaction and being satisfied did not find it necessary to make any addition u/s. 68 of the Act, which action could not have been interfered by the Ld. PCIT u/s. 263 of the Act since the jurisdictional condition precedent for invoking the same is not satisfied in the facts of this case as discussed supra. However in case still if he (Ld. PCIT) wanted to exercise his jurisdiction despite the AO making enquiries as found by us (supra), then he (Ld. PCIT) should have himself conducted preliminary enquiry and should have been able to show that AO's enquiry was not correctly made by finding deficiency/infirmity in the documents/material collected by the AO or even able to disprove the transaction of share capital by bringing material to suggest that the share transaction of assessee was an eye wash. This exercise the Ld. PCIT has not carried out. So according to us, in the light of the enquiries conducted by the AO in respect of share transaction, the Ld. PCIT could not have found the action of AO to be erroneous for want of no enquiry. And the view taken by the AO in respect of share transa ..... X X X X Extracts X X X X X X X X Extracts X X X X
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