TMI Blog2021 (10) TMI 79X X X X Extracts X X X X X X X X Extracts X X X X ..... e by the AO in their hands.Therefore, the finding of the learned CIT(A) is not correct upto this extent. Once the source of fund in the hand of above companies were held as explained by ld. CIT(A) then amount received by the assessee from these companies cannot be held as unexplained under section 68 of the Act in the proceedings carried out under section 263. All the document it is established that identity, genuineness of transaction and credit worthiness/sources of fund has been established. Further the learned principal CIT have not pointed out any deficiency in these documentary evidences neither any contrary evidences brought by the learned DR before us. Thus the finding of the learned CIT that the creditworthiness of the parties were not proven was not based on the cogent reasons. Thus the finding of the learned PCIT appears to be arbitrary and non-speaking. To our understanding the answer stands negative for the reason that proceeding under section 147 is limited to the extent of reason recorded. Though the provision section 147(1) authorizes AO to make addition with regard to any other issue if it comes to his/her notice during the proceeding. Here it is not the c ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... unt received from M/s. Rachna Finelease Pvt. Ltd. But there was no discussion/disallowance with respect to the amount credited from the remaining 2 companies. 3.2. Based on the above information, the learned Principal CIT was of the view that in the absence of returns filed by the companies as discussed above, the identity and creditworthiness of the companies were not established. Likewise, it was also not known whether these companies were maintaining any books of accounts. Therefore, creditworthiness of the parties namely M/s. Capaxo Logistics Pvt. Ltd. and M/s. Hit Flo Control Water Treatment Pvt. Ltd. were not proved as required under the provisions of section 68 of the Act. 3.3. In view of the above the learned Principal CIT show caused the assessee vide letter dated 3rd March 2020 proposing to hold the order passed by the AO under section 143 read with section 147 of the Act, as erroneous insofar prejudicial to the interest of revenue. 3.4. The assessee in response to such show cause notice made a reply vide letter dated 17th March 2020 by stating that the amount received towards the share application money of ₹ 84,04,00,000/- was duly disclosed in the audited ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... read with section 147 of the Act. The necessary details justifying the source of source in the hands of M/s. Capaxo logistics private Ltd. stand as under: Ledger A/c of Ramesh Thakor and Vinod Sharma for A.Y. 2009-10 evidencing loan given to them by Capaxo Logistics Pvt. Ltd. for ₹ 70,00,00,000/- Ledger A/c of Ramesh Tahkor and Vinod Sharma for A.Y. 2010-11 evidencing repayment of loan and advances given in earlier year by Capaxo Logistics Pvt. Ltd. for ₹ 10,00,00,000/- Ledger A/c of share application money received from Hansaben Patel, Vinod Sharma and Ramesh Thakor for ₹ 12,50,00,000/- for A.Y. 2010-11 from the books of Capaxo Logistics Pvt. Ltd. Ledger A/c of A.Y. 2011-12 showing share' application money returned to Hansaben Patel, Vinod Sharma and Ramesh Thakor for ₹ 12,50,00,000/- received in A.Y. 2010-11 from the books of Capaxo Logistics Pvt. Ltd. Further, the name and address of Hansaben Patel, Vinod Sharma and Ramesh Thakor were also submitted in reply dated 17.11.2017 and 14.12.2017 filed during the course of its assessment proceedings attached herewith as per Exhibit-V. 3.8. The assessee with respect to the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... n their reply are not accepted for the following reason; 10.1 M/s. Rachna Finlease Private Limited, Arham Properties Pvt. Ltd. and Hit Flo Control Water Treatment Pvt. Ltd. were non-filers. As per the report M/s. Rachna Finlease Pvt. Ltd., Arham Properties Pvt. Ltd. and Hit Flo Control Water Treatment Pvt. Ltd. had paid huge amount to the assessee in F.Y. 2009-10 relevant to A.Y. 2010-11. The assessee had received ₹ 80.04 crores as share application money from these three companies. Further, as per these three companies had received funds from the persons who had again not filed of Income. 10.2 As per the enquiry conducted by the investigation wing, it was clear that the identity and creditworthiness of above companies are not proved, as these companies had not filed their ITRs, other details of their books of accounts are also known. Therefore, these persons lack of creditworthiness to give huge sums as share application money to the assessee. 10.3 It has also come to my notice that during the proceedings before Hon'ble Settlement Commission, in the case of M/s. J.P. Iscon other group Companies the loans taken by assessee from the mentioned 3 entities ar ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... enquiry conducted by the AO during the assessment proceedings despite the information received from the investigation wing that the assessee has received bogus share application money. 6.1. It was also contended by the learned DR that in the group case of the assessee, it was duly admitted before the settlement commission to have received accommodation entry from the companies in dispute. The learned DR vehemently supported the order of the ld. PCIT. 7. We have heard the rival contentions of both the parties and perused the materials available on record. There was a search operation under section 132 of the Act dated 25th February 2016, carried out in case of group company of assessee i.e. JP Iscon Group. During the search, certain loose papers relating to the assessee were found from the residential premises of an individual who was subject to search namely Shri Sanjay Jesubhai Patel. From the seized papers, it was found that a sum ₹ 42,74,50,000/- was credited in the books of assessee from M/s. Rachna Finelease Pvt. Ltd. Based on search, an information was received from the investigation wing Ahmedabad by the AO that such company has not filed the income tax return. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... can revise the order of the AO and direct him to make addition in the above facts and circumstances. The provisions of section 263 of the Act conferred power to Principal Chief Commissioner or Chief Commissioner or Principal Commissioner or Commissioner to set aside the order of the AO, if he/she based on records of the proceedings considers that the order of the AO is erroneous and causing prejudice to the Revenue. 7.3. An order of the AO can be described as the erroneous if the same has been passed on basis of wrong assumption of facts, incorrect application of law, passed without application of mind or without making enquiry. However, an order may be erroneous but it is not necessary that that such error causing any prejudice to the Revenue. Therefore, before invoking the revisionary provisions of section 263 the Act, the ld. PCIT has to satisfy that such error in the order of the AO is causing prejudice to revenue. 7.4. Going further it is necessary for commissioner to point out the specific error in the order of the AO. As such the commissioner cannot hold any order of the AO as erroneous in arbitrary manner. In other words, the finding of the ld. commissioner should be ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... as to be exercised within the parameters of the provision. When the Commissioner is himself not able to form an opinion, he cannot direct another inquiry by the Assessing Officer under section 263. [Para 13] If the obtaining factual matrix was tested on the anvil of the aforesaid pronouncement of law, it was quite clear that the Commissioner had really made an effort to cause a routine inquiry with regard to the matter that had already been concluded. The Commissioner, it appeared, had thought that he had the authority to begin a fresh litigation because of the view entertained by him. The aforesaid inexhaustible approach was not permissible. He was required to arrive at a definite conclusion but he had not done so. In view of aforesaid analysis there was no reason to interfere with the order of the Tribunal and, therefore, same was to be approved. [Para 19] 7.6. However in the case on hand after going through the order of the learned Principal CIT under section 263 of the Act, it is not clear that whether the order of the AO under section 143(3) r.w.s. 147 is erroneous on account of non-application of mind or enquiry, or on account of wrong assumption of facts or law. As ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ilers and books were not maintained. Such finding of the ld. PCIT leads us to draw an inference that the conclusion has been drawn by him (PCIT) in arbitrary manner which is unwanted under the provisions of law. In other words, the order of the ld. PCIT was not speaking order in the light of the judgments cited above. 7.11. However, for the completeness of the case, we proceed assuming that the order of the AO has been held as erroneous insofar prejudicial to the interest of Revenue on merit as well as on account of non-enquiries. 7.12. First, we deal with the finding of the learned PCIT given by him on merit. It was alleged by the learned PCIT that the amount received by the assessee represents the accommodation entries from the companies as discussed above for the reason that such companies were not filing their income tax return. In this connection, we find that the finding of the learned principal CIT was not correct to some extent. It is for the reason that the company namely M/s. Rachna Finelease Pvt. Ltd. and M/s. Capaxo Logistics Pvt. Ltd. (Arham Properties Pvt. Ltd.) have filed income tax return in response to the notice issued under section 148 of the Act and accord ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of the assessee being JP Iscon has admitted before the settlement commission that they have taken bogus entries in the form of loan from these companies. But the AO, during the assessment proceedings has not considered this fact. In this connection, we have gone through the order of settlement commission which is available on record. Going through para No. 12 of such order we find that the settlement commission has discussed the flow of fund transferred through cheque/banking channel among Smt. Hansaben Patel, Asit S. Shah Group, assessee company, JP Iscon Pvt. Ltd., Shri Ramesh Thakur, Shri Vinod Sharma, M/s. Rachna Finelease, M/s. Capaxo logistics and M/s. Hitflo Water Control. The amount of share application money received by the assessee company is part of this flow of chain. Finally, the settlement commission has given clear finding that there was no involvement of any cash in the entire flow of transactions with these companies and there is not any generation of undisclosed income. The relevant finding of the settlement commission reads as under: In the aforesaid rotation of Cheque funds there is no any involvement of cash rotation of the appellant company itself and any ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... shall extend and shall be deemed always to have extended to such matters as had not been considered and decided in such appeal. 7.19. We also note that the Hon'ble Bombay High Court in the case of CIT vs. K. Sera Sera Productions Ltd. reported in [2016] 71 taxmann.com 40 [2015] 374 ITR 503 has held that the issues which have been considered by the learned CIT(A) cannot be subject matter of the revision under the provisions of the section 263 of the Act on the reasoning that the assessment framed by the AO got merged with the order of the learned CIT(A). The relevant portion of the Hon'ble court is reproduced hereunder: the claim of cost of production of film was a subject matter of appeal before the Commissioner (Appeals) and after consideration of remand report of the Assessing Officer he gave his findings. Therefore, the order of the Assessing Officer undisputedly had merged with the order of the first appellate authority as far as the claim of cost of production of the film is concerned. The attempt to reopen them cannot be saved as clause (c) of Explanation below sub-section (1) of section 263 had no application 7.20. Thus the entire basis of allegation ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... CIT vs. Lark Chemicals Ltd. reported in 55 taxman.com 446 wherein it was held as under: 12. We have considered the rival submissions. It is not disputed that save and except the issue of non-genuine purchases all other issues dealt with by the Commissioner of Income-tax in the order dated March 30, 2009, were not a subject matter of the assessment order passed on June 28, 2006, under section 143(3)/147 of the Act. all the other issues on which the Commissioner of Income-tax is seeking to exercise the jurisdiction under section 263 of the Act were concluded by virtue of an intimation under section 143(1) of the Act which admittedly was done beyond a period of two years prior to the notice dated March 17, 2009, issued under section 263 of the Act. Section 263(2) of the Act provides that no order would be made in exercise of the jurisdiction under section 263(1) of the Act after the expiry of two years from the end of the financial year in which the order sought to be revised was passed. It is an admitted position that the Commissioner of Income-tax has not exercised the revisional jurisdiction in respect of the order/intimation passed section 143 of the Act within two years of it ..... X X X X Extracts X X X X X X X X Extracts X X X X
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