TMI Blog2021 (10) TMI 1246X X X X Extracts X X X X X X X X Extracts X X X X ..... characteristic of any administrative or quasi-judicial function in any case. The revisional order so passed, in the instant case, alleging existence of some adverse material without enabling the assessee to respond thereto and without giving any effective opportunity despite express demand is thus palpably fragile and requires to be treated as illegal. In the absence of adherence to salutary principles, the purported new material is rendered extraneous and hence required to be ignored as non est and consequently, the revisional action is required to be tested dohors such alleged material. The whole case of the PCIT built on such unintelligible and non-descript premise is thus a damp squib. On this score too, the revisional action fails. Looking from any angle, the directions towards verification of loan transactions are unsustainable in law and deserve to be quashed. The directions no. 1-4 are thus set aside. Applicability of Section 56(2)(viib) in respect of shares issued - We are unable to see any error in the action of the AO towards his endorsement on issue of shares at premium. The premium charged is demonstrated to be strictly as per the immediately last available aud ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... h action. Section 263 is not meant to conduct roving inquiry howsoever wide the amplitude of the powers may be. When a glaring and demonstrable fact has been placed before the PCIT to address his concern, the minimum that is expected of him is to look at the relevant facts. He cannot direct the Assessing Officer to make further inquiry/adequate inquiry without himself looking into the facts and carrying out some minimum inquiry to demonstrate the error. The mundane and perfunctory remittance of the issue to the file of the Assessing Officer cannot be approved. The action of PCIT is thus set aside and that of AO is restored. Applicability of Section 40A(3) in respect of payment for purchase of land - We straight away find substantial merit in the plea of the assessee that Section 40A(3) has no application in the facts of the case where the payment was made merely by way of advance and consequently not claimed as expenditure/deduction. The PCIT has not controverted the claim of the assessee that no expenditure has been claimed under the provisions of law towards advances made. Apparently, the provisions of Section 40A(3) does not apply to such transactions of mere advance withou ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... insofar as it is prejudicial to the interest of the Revenue. A show-cause notice dated 08.03.2021 (signed on 09.03.2021) was issued to the assessee in this regard seeking compliance through e-mail inexplicably on or before 17.02.2021, i.e. prior to the issuance of notice itself. The personal hearing was however simultaneously allowed to be availed at 11.03.2021 at 11.00 am, i.e. within less than 48 hours from the date and time of signing the show-cause notice. 4. As per the show-cause notice, the Revisional Commissioner made wide ranging allegations to assail the assessment order. The Revisional Commissioner alleged that the Assessing Officer has failed to carry out necessary verifications in respect of following points:- (i) During the year under consideration, the assessee made repayment of ₹ 6,11,26,848/- to M/s. Gangotri Tracon P. Ltd. ('GTPL' in short). It was accordingly observed that interest payment of ₹ 47,36,052/- and repayment of ₹ 6,11,26,848/- should have been disallowed in terms of Section 69C of the Act; (ii) Advance against sale of land of ₹ 16 crores was received, but no sale deed was furnished by the assessee; The advan ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he assessee. Therefore, I am satisfied that the assessment order is erroneous in so far as it is prejudicial to the interest of revenue in view of Explanation 2 of Section 263 of the Income tax Act. The A.O. is directed to make adequate enquiries. 1. Identity, Genuineness and creditworthiness of M/s. Gangotri Tracon P. Ltd. in respect of receipt of sum of ₹ 16,00,00,000/- in the light of provisions of section 68 of the I.T. Act, 1961. 2. To verify the genuineness of both stamp paper with competent authority who issued those stamp papers. 3. To invoke the doctrine of Substance over form in respect of transaction with M/s. Gangotri Tracon P. Ltd. after due verification. 4. To verify the repayment and interest payment of sum of ₹ 6,11,26,848/- ₹ 47,36,052 respectively. 5. To verify the applicability of section 56(2)(viib) in respect of shares issued. 6. To verify the applicability of section 43CA in respect of sale deed executed below stamp duty value. 7. To verify the applicability of section 40A(3) in respect of payment for purchase of land. 6. Aggrieved by the impugned revisional order, the assessee preferred appeal before ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... es alleged by the PCIT was not received during the year at all, but was received in the preceding Assessment Year 2014-15. A fresh advance received during the year stands at ₹ 2.12 crores only. For this assertions, a reference was made to the ledger account of the lender company (page no. 115 of the paper-book) to demonstrate that amount of ₹ 16 crores referred to by PCIT was received though banking channel in FY 2013-14 relevant to AY 2014-15. Similarly, the ledger account (page no. 117 of the paper-book) was referred to demonstrate that only a sum of ₹ 2.12 crores was received during the year. It is thus contended that the PCIT clearly misdirected himself in law in giving wrongful directions of enquiry on the touchstone of Section 68 for such amount received in a different Financial year. It was asserted that the scope of S. 68 is restricted to credits received during the year and does not extend to transactions of credits received in some other assessment year. The assessee thus contends that the directions of the PCIT to make enquiry in this regard is without any legal basis. The AO committed no error in not invoking S. 68 for past credits and the directions o ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e right of cross-examination of such a third party was thus naturally denied despite requests. It was thus contended that in the absence of the assessee being privy to such adverse material, the action against the assessee cannot be invoked under any circumstances. As further submitted, the lender is a closely held co. and not listed and it is a matter of examination to understand as to how the SEBI is implicated such closely held co. behind its back and without any opportunity. The current status of the allegation of SEBI is also unknown. The whole affair is kept a deep secret while trying to displace a completed assessment. The AO in absence of any adverse information on record at the relevant time could not foresee and imagine any enquiry on this aspect. The action of AO could be possibly branded as erroneous, only if the AO was also privy to such purported information adverse to the Assessee at the relevant time of assessment but has failed to make enquiries necessitated in law. This is not the case. The bonafide action of AO, not being privy to such so called information, thus can not be said to be falling within the ambit of clause (a) to Explanation 2 of S. 263 of the Act an ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... relation to transaction with GTPL suffers of vice of lack of application of mind and wholly wrong appreciation of facts and law. The directions given to AO to reframe the assessment these counts are inherently and patently opposed to mandate of provisions of S. 263 of the Act. 10. As evident, the facts narrated on behalf of the assessee speak for itself and does not require any serious elaboration. It is trite that section 68 cannot be invoked in relation to credits unconnected to the assessment year in question. The facts on records placed before the PCIT as well as before us clearly show that the alleged sum of ₹ 16 crores from GTPL was not received in assessment year in question but was received in the earlier assessment year and was duly assessed. The amount represents opening balance of carried forward credit of an earlier year. Hence, the direction for verification of transactions, outside the purview of Section 68 of the Act, travels beyond the scope of powers conferred under S. 263 and could not have been given by the PCIT in the garb of revision. The consequential directions towards genuineness of stamp paper of receipt of advance from GTPL and applicability of do ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rest of revenue in certain situations noted therein. We are presently concerned with clause (a) thereto. Clause (a) to Explanation (2) confers powers on the revisional authority under Section 263 where the order is passed without making inquiries or verifications which should have been made. Apparently, in the absence so called incriminating material (as allegedly gathered from third parties in the instant case) at the time of assessment, there is no occasion for the AO to embark upon inquiries which should have been made, as expected in terms of clause (a) Explanation 2. The AO could not be expected to fathom some roving enquiry in the absence of specific inputs which purportedly came to the possession of the PCIT subsequent to the assessment. This is notwithstanding the fact that the impugned receipt of ₹ 16 cr., (sought to be treated as unexplained credit) in itself is unconnected to the assessment of this year. Hence, the alleged lack of enquiry on this issue in the impugned assessment year in question cannot legitimately be deemed as 'erroneous' on the basis of facts coming to light subsequently and that too, in relation to transactions occurred and relatable to ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ter the completion of the assessment order, it is ostensible that the sacrosanct principles of natural justice in relation to such new adverse material has not been observed at the stage of framing the assessment order. Thus an obvious incidental question would arise towards safeguards available to the Assessee and onus placed on the revisional authority seeking to disturb the order passed in such an extra-ordinary situation. Prima facie, it appears to us that the revisional authority would, in such a situation, be required to don and subsume the quasi judicial role played by the AO as envisaged in law. In the event of fresh material coming to light, the revisional authority can not bypass the principles of natural justice and casually pre-empt such order to be erroneous. A cancellation of an order already passed and coming to the fore, based on fresh material, without performing quasi-judicial task of confronting the material to Assessee and weigh its defense thereon, would be clearly opposed to doctrine of legitimate expectations and would have to be construed as a mere ipse dixit and a perfunctory exercise of revisional powers. In our mind, the imperatives of enshrined principle ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ed and made available to Assessee. Such material were admittedly never confronted to the assessee despite specific request. 14.1. Pertinent here to observe that while it is fairly settled that substantive power enshrined in the Act cannot be ordinarily held hostage to procedural requirements, nonetheless, it bears to recall that procedure delineated in section 263 is a substantive provision and the provision explicitly requires the revisional authority to meet the mandate of principles of natural justice., an abiding characteristic of any administrative or quasi-judicial function in any case. The statutory protocols are required to be scrupulously met, more so, when revision impinges upon some sort of civil rights accrued to the assessee and seeks to unsettle a settled assessment. It must be acknowledged that such exercise of powers of revision of a concluded assessment and for no fault of assessee, hugely drains the assessee who has to undergo a restart of concluded proceeding. Keeping this in view, the revisional authority being a very senior officer in the hierarchy is expected to exercise powers conferred under section 263 with diligence, dexterity and reasonableness to achi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ediately last available audited and approved balance-sheet at the time of issue of shares. The action of the Assessee is thus on a sound basis. We find prima facie merit in the plea advanced for justification of the requirement of Section 56(2)(viib) of the Act. No abnormality is discernable in the admission of claim of the Assessee by the AO. On facts, the balance-sheet for the FY 2013-14 was stated to be signed on 29.08.2014, i.e. after the issue of shares on 30.07.2014 and, therefore, the stance of the assessee to adopt the figures as per last audited accounts of FY 2012-13 is plausible. The Assessing Officer has weighed these facts and has come to a reasonable conclusion. 17.1. Otherwise also, valuation dynamics is contingent upon of plethora of factors such as market interest, feasibility, perception etc. and cannot be determined with a mathematical precision. It is often said that valuation is an art rather than a science. A meager difference in premium qua a book net-worth as per past balance-sheet would not, in our view, necessarily invite the deeming fiction in the larger context of its stated objects. Such course is certainly not decipherable under the shelter of revis ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ction, the applicability of Section 40A(3) in respect of payment for purchase of land has been remitted by the PCIT for fresh verification. We straight away find substantial merit in the plea of the assessee that Section 40A(3) has no application in the facts of the case where the payment was made merely by way of advance and consequently not claimed as expenditure/deduction. The PCIT has not controverted the claim of the assessee that no expenditure has been claimed under the provisions of law towards advances made. Apparently, the provisions of Section 40A(3) does not apply to such transactions of mere advance without being claimed as expenditure. The genuineness of stamp-paper for execution of documents for advance payment is not relevant where no prejudice is caused to the revenue having regard to the fact that no expenditure has been claimed at all. The proposed directions are grossly opposed to the scheme of the revisionary powers. We thus see no merit, whatsoever, in this direction either. 20. The whole set of directions given by the revisional order thus are thus marred in law and traveled beyond the mandate. In the backdrop of reasons noted above on various points, the ..... X X X X Extracts X X X X X X X X Extracts X X X X
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