9911796707
TMI Blog2021 (12) TMI 1286X X X X Extracts X X X X X X X X Extracts X X X X ..... Pr. CIT, according to assessee, is without satisfying the requisite conditional precedent as stipulated u/s. 263 of the Act and therefore without jurisdiction and resultantly bad in law, so it has to be quashed. [Please note that since there are two assessment orders, and two Ld. Pr. CITs involved in this Appeal, for better & easy understanding the case, the AO, who framed the original assessment order is called as 'First AO' and the re-assessment /second assessment framed AO will be called as the 'Second AO' and the first revisional order passed by Pr. CIT is called as 'First Ld. Pr. CIT' and the second incumbent, who passed the impugned order is called as 'Second Ld. Pr. C.I.T']. 3. Brief facts of the case are that the assessee filed its return of income on 11.09.2012 declaring an income of Rs. 6,635/-. The case was selected for scrutiny u/s. 143(3) of the Act under CASS and assessment u/s. 143(3) of the Act was framed by the AO (hereinafter referred to as the First AO) in the original first assessment on 16.03.2015 making addition of total income of Rs. 9,09,44,000/- under section 68 of the Act on account of alleged unexplained cash credit being share premium received while acc ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 16, the Ld. Pr. CIT-4 (hereinafter referred to as the second Ld. Pr. CIT) issued show cause notice (SCN) wherein he proposed to exercise his revisional jurisdiction (hereinafter referred to as the second SCN). The second Ld. Pr. CIT thereafter heard the assessee and passed the impugned order dated 15.03.2019 wherein he was pleased to again set aside the reassessment order/second assessment order dated 08.06.2016 and directed de-novo adjudication (hereinafter referred to as the second impugned revisional order of Ld. Pr. CIT or impugned order) by observing as under: "7. In my considered opinion, this is a case of lack of enquiry on the part of the AO not collecting the full facts and not taking enquiry to logical end which could enable AO to take decision based on the totality of facts makes this order erroneous in so far as prejudicial to the interest of revenue. 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 accordance with the Explanation 2(c) below section 263(1) of the Act. Accordingly ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... r, the AO after having gone through the documents accepted the share capital to the tune of Rs. 19,56,000/- as genuine and found fault with the share premium to the tune of Rs. 9,09,44,000/- which was added as unexplained cash credit. It was brought to our notice by Shri S.K. Tulsiyan that the assessee had filed a copy of audited books of accounts, bank statements and all details sought by the first AO was produced, however the AO made the addition of premium while he accepted the share capital which action itself being erroneous, the Ld. Pr. CIT (First) rightly interfered taking note of the fact that the AO in the first round did not look into the replies and explanation filed by the share applicants as well as having gone through the documents filed by them and since the AO failed to take further steps towards non-adversarial tax regime as instructed by CBDT dated 07.11.2014, the Ld. first Pr. CIT was pleased to set aside the first assessment order dated 16.03.2015 with the direction for de-novo assessment and directed the AO (Second) to carry out proper examination in the light of the directions made by him. According to Shri S.K. Tulsiyan, all the aforesaid directions of the Fi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... uired related to second source. Records were test checked received from the parties proving identity of parties, genuinity of the transactions, creditworthiness and again it was observed that all the transactions were made through banking channel and duly recorded in the books of accounts of the parties. Accordingly it is inferred that: (i) As the shareholders are private limited companies and registered with the Ministry of Corporate Affairs they have an established identity. (ii) Details of source of funds have been submitted by all the share holders. (iii) None of the applications have been made otherwise than by banking channels. (iv) All the investors have submitted their Annual reports and IT returns and (v) In all the cases the investments is duly reflected in the Annual Accounts of the respective investors." 8. The Second AO after going through the records and after enquiries made the findings that the share applicants/share holders' identity have been established since they are all registered with the Ministry of Corporate Affairs being Private Limited Companies and that the source of the fund for share capital & premium have been submitted by all the shar ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... if this practice is allowed, there will be no end to the assessment proceedings, since if the next i.e. third or fourth Pr. CIT does not like the next assessment orders being passed by an AO under his jurisdiction, in the way he thought it as proper enquiry to have been conducted in a given case or subject matter, then he will interfere and ask the AO to re-do the assessment again and again, which is not permissible and that is exactly why the Parliament in its wisdom has brought in safe-guards, restrictions & conditions precedent to be satisfied strictly before assumption of revisional jurisdiction. According to Shri S.K. Tulsiyan, the essential conditions precedent for assumption of revisional jurisdiction is that the Ld. Pr. CIT should find that assessment order framed by the AO as erroneous in so far as prejudicial to the Revenue. According to Ld. A/R, the Second Ld. Pr. CIT without satisfying this condition precedent has invoked the revisional jurisdiction (second time), so all his actions are ab-initio void. The Ld. AR also pointed out that only from the next AY i.e. AY 2013-14 i.e. with effect from 01.04.2013, the Parliament has inserted sub-clause (vii) (b) in sub-section(2 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... re of the Constitution of India. Since the law was that assessee should furnish the source of share capital it received in this A.Y, assessee by producing all documents in respect of share-applicants had discharged its onus, then burden shifts to the shoulder of AO to find fault with the documents or test the veracity of the documents. Despite the law was as such, then also AO in the second round, pursuant to the direction of the First Ld. Pr. CIT-4 the share applicants filed source of source for applying for the share capital and premium, thus it was pointed out by Shri S.K. Tulsiyan that the source of source was also disclosed before the second AO and also furnished inter-alia information that they are having PAN and regularly filing tax returns. Therefore, according to Shri S.K. Tulsiyan, the AO has conducted enquiries and has recorded these facts/finding and, therefore, order of the AO who is a quasi-judicial authority vested with the power to assess the income of an assessee cannot be termed as erroneous for lack of enquiry. Further according to Shri S.K. Tulsiyan, the view of the second AO on the facts of the case is a plausible view and the Second Ld. Pr. CIT has not termed ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 16.03.2015. Thereafter, the First Ld. Pr.CIT passed his First Revision order u/s. 263 of the Act on 28.03.2016, wherein he was pleased to set aside the original assessment order dated 16.03.2015 and directed de-novo assessment after proper examination of matter discussed in his order which included share capital and premium. 11. Pursuant to the direction of the First Ld. Pr.CIT dated 28.03.2016, the second AO framed the de-novo re-assessment order dated 08.06.2016, wherein the second AO was pleased to accept the assessee's transaction in respect of collection of share capital and share premium to the tune of Rs. 9.28 crore. And the AO framed the second assessment order by making an addition of only Rs. 6,400/- u/s. 14A of the Act. Thereafter, the new incumbent in the office of Pr. CIT-4, Kolkata issued show cause notice and conveyed his intention to revise the re-assessment/second assessment order of the second AO dated 08.06.2016. After hearing the assessee, the second Ld. Pr. CIT has set aside the said re-assessment/second assessment order of the AO dated 08.06.2016, wherein the Second Ld. Pr. CIT, Kolkata-4, Kolkata vide order dated 15.03.2019 directed the AO to pass a fresh a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... an issue before him; then the assessment order passed by the Assessing Officer can be termed as an erroneous order. Coming next to the second limb, which is required to be examined is as to whether the actions of the AO can be termed as 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. Their Lordship held that it has to be remembered that every loss of revenue as a consequence of an order of Assessing Officer cannot be treated as prejudicial to the interest of the revenue. When the Assessing Officer adopted one of the courses permissible in law and it has resulted in loss to the revenue, or where two views are possible and the Assessing Officer has taken one view with which the Pr. CIT/CIT does not agree, it cannot be treated as an erroneous order prejudicial to the interest of the revenue "unless the view taken by the Assessing Officer is unsustainable in law." ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... therefore, need to be struck down. We note that in order to interfere with the second assessment/re-assessment order passed by the Second AO u/s. 143(3)/263 of the Act dated 08.06.2016, the Second Ld. Pr. CIT has alleged lack of enquiry on the part of the AO in respect of share application money, and for not collecting the full facts. Therefore, it is noted that according to Ld. Pr. CIT, the AO's (second AO) decision was not based on the totality of facts, which makes the second assessment/re-assessment order erroneous in so far as prejudicial to the interest of the revenue. The second Ld. Pr. CIT also opines that the AO's order dated 08.06.2016 of the AO (second assessment/re-assessment order) is in accordance with the Explanation 2(c) below section 263(1) of the Act(supra), therefore by deeming fiction of law the order is erroneous. Therefore, he was pleased to set aside the said re-assessment order/second assessment order and directed the AO to pass a fresh/de-novo assessment order, which will be the third assessment order. According to the Ld. Counsel, the Second Ld. Pr. CIT in the second round while exercising his revisional jurisdiction could not have first of all assumed re ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ith the action of AO for violation of natural justice. Therefore, according to the First Ld. Pr. CIT the first original assessment order framed u/s. 143(3) dated 16.03.2015 was in violation of direction of Ld. Pr. CIT, Kolkata in connection with Board's circular and office memorandum dated 07.11.2014 of CBDT in respect of adherence to non-adversarial tax regime was not followed by the first AO while framing the assessment order dated 16.03.2015 and, therefore, he found it fit to order de-novo assessment and gave direction to examine the share capital & premium collected by assessee. 20. So we note that the second AO was specifically directed by the First Ld. Pr. CIT to carry out the de-novo assessment. Thereafter, we note that the original assessment of AO dated 16.03.2016 was set aside back to AO u/s. 263 of the Act by the First Ld. Pr. CIT by his first revisional order dated 28.03.2016 for de-novo assessment which means the second AO was free to assess the income of assessee afresh. 21. Now let us examine whether the second AO carried out his role of an investigator while carrying out the de-novo assessment. In this respect, we note that pursuant to the order of the First Ld. P ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the source of the fund for share capital & premium have been submitted by all the share holders. It has also been found by the Second AO that in all the cases the investments made by them have been duly reflected in their respective annual accounts; and thereafter, he was pleased to accept the share capital and premium since the assessee was able to explain to his satisfaction the nature and source of the credit entry. Thereafter, he made only an addition of disallowance to the tune of Rs. 6,400/- u/s 14A of the Act. Thus it is noted that second AO did not draw any adverse inference against the share capital and premium collected by the assessee after carrying out the aforesaid exercise as directed by the First Ld. Pr. CIT to him. This exercise carried out by the second AO while framing the second assessment/reassessment has been faulted as a case of lack of enquiry by the second Ld. Pr.CIT and the precise question is whether the action of second AO in respect of share capital and premium collected by the assessee can be termed as a case of lack of enquiry. 23. According to us, when the Assessment Order is framed on an issue which is the result of lack of enquiry, then the assessm ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ooks of such company also offers an explanation about the nature and source of such sum so credited; and (b) Such explanation in the opinion of the Assessing officer aforesaid has been found to be satisfactory: Provided further that nothing contained in the first proviso shall apply if the person, in whose name the sum referred to therein is recorded, is a venture capital fund or a venture capital company as referred to in clause (23FB) of section 10]. 25. Here it is to be noted that the first proviso and second proviso was inserted by Finance Act, 2012 with effect from 01.04.2013, so it is applicable only for/from AY 2013-14 and not for this relevant AY 2012-13. 26. Next let us refer to the definition of income stated in Section 2(24) of the Act. Section 2(24) of the Act includes:- i) profits and gains ........ ......... xvi) any consideration received for issue of shares as exceeds the Fair Market Value of the shares referred to in clause (viib) of sub-section (2) of section 56. 27. It is noted that this amendment was made by an insertion of clause (xvi) in section 2(24) of the Act was by Finance Act 2012 with effect from 01.04.2013. 28. Correspondingly, th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ed. So, the assessee is bound to explain before the AO the nature and source of share capital, i.e. the identity, creditworthiness and genuineness of the share capital. In this AY, the assessee is bound to know about the share applicants who wish to invest their identity, whether they have the financial capacity (creditworthiness) and they are genuine investors in their company (assessee). In this relevant AY, the assessee is not bound by law at the time of collection of share capital to ask the share-applicants from where it is getting the money to invest in the assessee's company. And we also note that share premium can be taxed if it exceeds the fair market value only from next AY i.e. AY 2013-14 and not in this A.Y. For coming to such a conclusion let us discuss few case laws: (A) Coming to the share premium, it is noted that this Tribunal in ITA No.- 2411/KOL/2017 in the case of Kanchan Plywood Products Pvt. Ltd. -vs.- ITO vide order dated 01.05.2019 has taken note that: Per contra, the Learned DR vehemently supported the order of the authorities below and wondered us to how the assessee-company issued share to three Private Limited Companies when its face value of Rs. 10/- ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ugned order of the Tribunal and on facts it has found satisfied. (ii) Further it was a submission on behalf of the Revenue that such large amount of share premium gives rise to suspicion on the genuineness (identity) of the shareholders i.e. they are bogus. The Apex Court in CIT vis. Lovely Exports (P) Ltd. 317 ITR 218 in the context to the pre-amended Section 68 of the Act has held that where the Revenue urges that the amount of share application money has been received from bogus shareholders then it is for the Income Tax Officer to proceed by reopening the assessment of such shareholders and assessing them to tax in accordance with law. It does not entitle the Revenue to add the same to the assessee's income as unexplained cash credit." (B) The Tribunal Mumbai Bench in the case of DCIT vs. M/s. Alcon Biosciences (P) Ltd., ITA No. 1946/M/2016, Order dated 28.02.2018 held as under: "As regards the AOs observation with regard to the issue of shares at a face value of Rs. 10/- issued at a premium of Rs. 990 per share, we find that there is no merit in the findings of the AO for the reason that the issue of shares at a premium and subscription to such shares is within the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... isputed facts, it can be safely concluded that the initial burden of proof as rested upon the assessee has been successfully discharged by the assessee. Even if it is held that excess premium has been charged, it does not become income as it is a capital receipt. The receipt is not in the revenue field. What is to be probed by the AO is whether the identity of the assessee is proved or not. In the case of share capital, if the identity is proved, no addition can be made u/s 68 of the Act. We draw support from the decision of the Hon'ble Supreme Court in the case of Lovely Exports Ltd. 317 ITR 218." (D) [Green Infra Limtied - 38 taxmann.com 253 (Mumbai-Trib). 10. We have considered the rival submissions and carefully perused the orders of the lower authorities and the material evidences brought on record in the form of Paper book. The entire dispute revolves around the charging of share premium of Rs. 490/- per share on a book value of Rs. 10/- each. This dispute is more so because of the fact that the assessee company was incorporated during the year under consideration. Therefore, according to the revenue authorities, it is beyond any logical reasoning that a company with ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... not applicable for the subject assessment year 2012-13. So for as the pre-amended section 68 of the Act is concerned, the same cannot be invoked in this case, as evidence was led by the respondents-assessees before the Assessing Officer with regard to identity, capacity of the investor as well as the genuineness of the investment. Therefore, admittedly, the Assessing Officer did not invoke section 68 of the Act to bring the share premium to tax. Similarly, the Commissioner of Income-tax (Appeals) on consideration of facts, found that section 68 of the Act cannot be invoked. In view of the above, it is likely that the Revenue may have taken an informed decision not to urge the issue of section 68 of the Act before the Tribunal. It is further pertinent to note that the definition of income as provided under section 2(24) of the Act at the relevant time did not define as income any consideration received for issueof share in excess of its fair market value, This Came into the statute only with effect from April 1, 2013 and thus, would have no application to the share premium received by the respondent-assessee in the previous year relevant to the assessment year 2012-13. Similarly, ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... venture capital fund, and venture capital undertaking shall have the meanings respectively assigned to them in clause (a), clause (b) and clause (c) of Explanation to clause (23FB) of section 10]". It was pleaded that the aforesaid provisions cannot be made applicable for the year under appeal. Accordingly, it was argued that the issuance of shares of premium cannot be brought to tax under any section of the Income Tax Act up to assessment year 2012- 13. We find that the reliance placed by the Id. AR in the decision of Hon'ble Bombay High Court in Pr. CIT vs. Apeak Infotech reported in 88 Taxmann.com 695 dt 08.06.2017 wherein the question raised before the Hon'ble Bombay High Court are as under: A. Whether on the facts and circumstances of the case and in law, the Tribunal was correct to uphold the decision on Commissioner of Income Tax (Appeals) that the share premium received by the assessee-company cannot be taxed under Section 68 of the Act ignoring the ratio laid down by this Court in its decision reported in the case of Major Metals Ltd. vs. Union of India [2013J 3591TR 450 (Bom)? B. Whether on the facts and circumstances of the case and in law, the Tribun ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... n an informed decision not to urge the issue of section 68 of the Act before the Tribunal. (d) We may also point out that decision of this court in Major Metals Ltd. v. Union of India [20121 19 taxmann.com 1761207 Taxman 185/[20131 359 ITR 450 Bom. proceeded on its own facts to uphold the invocation of section 68 of the Act by the Settlement Commission. In the above case, the Settlement Commission arrived at a finding of fact that the subscribers to shares of the assessee-company were not creditworthy inasmuch as they did not have financial standing which would enable them to make an investment of Rs. 6,00,00,000 at premium at Rs. 990 per share. It was this finding of the fact arrived at by the Settlement Commission which was not disturbed by this court in its writ jurisdiction. In the present case the person who have subscribed to the share and paid share premium have admittedly made statement on oath before the Assessing Officer as recorded by the Tribunal. No finding in this case has been given by the authorities that shareholder/share applicants were unidentifiable or bogus. (e) In the above view Question No. A is not being entertained in view of the decision in Tata Chem ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the Act at the relevant time (AY 2012-13) did not define as income any consideration received for issue of shares in excess of its fair market value. This came into effect from 01.04.2013 and thus would have no application to the share premium received by the assessee in the previous year relevant to AY 2012-13. With this back-drop in respect of the requirement of law, let us study the judicial precedents which were laid by the Hon'ble Apex Court and Hon'ble High Courts on the provision of section 68 of the Act, while dealing with Share Capital/loan etc. so that we can examine whether pursuant to the specific direction of First Ld. Pr. CIT, the second AO has discharged his role as an investigator and whether his re-assessment/second assessment order is a plausible view or can be termed as unsustainable view. Before we adjudicate let us look at section 68 of the Act as is applicable in this case and the judicial precedents on the issue at hand. 31. Section 68 of the Act under which the addition has been made by the Assessing Officer reads as under: "68. Where any sum is found credited in the books of an assessee maintained for any previous year, and the assessee offers no explana ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... laid down by the Supreme Court in the case of Orissa Corporation [1986] 159 ITR 78. In the said decision the Supreme Court has observed that when the assessee furnishes names and addresses of the alleged creditors and the GIR numbers, the burden shifts to the Department to establish the Revenue's case and in order to sustain the addition the Revenue has to pursue the enquiry and to establish the lack of creditworthiness and mere non-compliance of summons issued by the Assessing Officer under section 131, by the alleged creditors will not be sufficient to draw and adverse inference against the assessee. in the case of six creditors who appeared before the Assessing Officer and whose statements were recorded by the Assessing Officer, they have admitted having advanced loans to the assessee by account payee cheques and in case the Assessing Officer was not satisfied with the cash amount deposited by those creditors in their bank accounts, the proper course would have been to make assessments in the cases of those creditors by' treating the cash deposits in their bank accounts as unexplained investments of those creditors under section 69. 33. In the case of Nemi Chand Kothar ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... sub-creditor, the burden on the assessee under section 68 is definitely limited. This limit has been imposed by section 106 of the Evidence Act which reads as follows: "Burden of proving fact especially within knowledge.-When any fact is especially within the knowledge of any person, the burden) of proving that fact is upon him." ******** What, thus, transpires from the above discussion is that white section 106 of the Evidence Act limits the onus of the assessee to the extent of his proving the source from which he has received the cash credit, section 68 gives ample freedom to the Assessing Officer to make inquiry not only into the source(s)of the creditor but also of his (creditor's) sub-creditors and prove, as a result, of such inquiry, that the money received by the assessee, in the form of loan from the creditor, though routed through the sub-creditors, actually belongs to, or was of, the assessee himself. In other words, while section 68 gives the liberty to the Assessing Officer to enquire into the source/source from where the creditor has received the money, section 106 makes the assessee liable to disclose only the source(s) from where he has himself receive ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ch he has with the assessee. The reason why we have formed the opinion that it is not the business of the assessee to find out the actual source or sources from where the creditor has accumulated the amount, which he advances, as loan, to the assessee is that so far as an assessee is concerned, he has to prove the genuineness of the transaction and the creditworthiness of the creditor vis-a-vis the transactions which had taken place between the assessee and the creditor and not between the creditor and the sub-creditors, for, it is not even required under the law for the assessee to try to find out as to what sources from where the creditor had received the amount, his special knowledge under section 106 of the Evidence Act may very well remain confined only to the transactions, which he had' with the creditor and he may not know what transaction(s) had taken place between his creditor and the sub-creditor..." ********** "In other words, though under section 68 an Assessing Officer is free to show, with the help of the inquiry conducted by him into the transactions, which have taken place between the creditor and the sub-creditor, that the transaction between the two were ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rely on the failure of the sub-creditors to prove their creditworthiness." 34. Further, in the case of CIT v. S. Kamaljeet Singh [2005] 147 Taxman 18(All.) their lordships, on the issue of discharge of assessee's onus in relation to a cash credit appearing in his books of account, has observed and held as under: "4. The Tribunal has recorded a finding that the assessee has discharged the onus which was on him to explain the nature and source of cash credit in question. The assessee discharged the 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." 35. We also take note of the decision of the Hon'ble High Court, Calcutta in the case of S.K. Bothra & Sons, HUF v. Income-tax Officer, Ward- 46(3), Kolkata 347 ITR 347 wherein the Court held as follows: "15. It is now a settled law that while ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... to any witness is immaterial when the material documents made available, should have been accepted and indeed in subsequent year the same explanation was accepted by the Income-tax Officer. He further contended that when the Tribunal has relied on the entire judgment of the Commissioner of Incometax (Appeals), therefore, it was not proper to take up some portion of the judgment of the Commissioner of Income-tax (Appeals) and to ignore the other portion of the same. The judicial propriety and fairness demands that the entire judgment both favourable and unfavourable should have been considered. By not doing so the Tribunal committed grave error in law in upsetting the judgment in the order of the Commissioner of Incometax (Appeals). 9. In this connection he has drawn our attention to a decision of the Supreme Court in the case of Udhavdas Kewalram v. CIT [19671 66 ITR 462. In this judgment it is noticed that the Supreme Court as proposition of law held that the Tribunal must In deciding an appeal, consider with due care, all the material facts and record its finding on all the contentions raised by the assessee and the Commissioner in the light of the evidence and the relevant la ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... strained to hold in this matter that the Tribunal has not adjudicated upon the case of the assessee in the light of the evidence as found by the Commissioner of Income-tax (Appeals). We also found no single word has been spared to up set the fact finding of the Commissioner of Income-tax (Appeals) that there are materials to show the cash credit was received from various persons and supply as against cash credit also made. 13. Hence, the judgment and order of the Tribunal is not sustainable. Accordingly, the same is set aside. We restore the judgment and order of the Commissioner of Income-tax (Appeals). The appeal is allowed. 37. When a question as to the creditworthiness of a creditor is to be adjudicated and if the creditor is an Income Tax assessee, it is now well settled by the decision of the Hon'ble Jurisdictional Calcutta High Court that the creditworthiness of the creditor cannot be disputed by the AO of the assessee but the AO of the creditor. In this regards our attention was drawn to the decision of the Hon'ble High Court, Calcutta in the COMMISSIONER OF INCOME TAX, KOLKA TA-III Versus DATAWARE PRIVATE LIMITED ITAT No. 263 of 2011 Date: 21st September, 2011 whe ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... o 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 Rs. 4, 00, 000/- and Rs. 20,00,000/- towards share capital and share premium respectively amounting to Rs. 24,00, 000/- from four shareholders being private limited companies. The Assessing Officer on his part called for the details from the assessee and also from the share applicants and analyzed the facts and ultimately observed certain abnormal features, which were mentioned in the assessment order. The Assessing Officer, therefore, concluded that nature and source of such money was questionable and evidence produced was unsatisfactory. Consequently, the Assessing Officer invoked the provisions under Section 68/69 of the Income Tax Act and made addition of Rs. 24,00,000/-. On appeal the Learned CIT (A) by following the decision of the Supreme Court in the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... sue, 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 investment in the Assessee Company was not genuine, on the basis of some extraneous reasons. The Commissioner of Income Tax (Appeals) took note of the observation of the Assessing Officer that enquiry conducted by the Income Tax Inspector had revealed that nine persons making applications for 900 shares were not available at the given address and rightly concluded that the total share capital issued by the Assessee Company could not be added as unexplained cash credit under 'Section 68 of the Income Tax Act. Moreover, if the nature and source of investment by any shareholder, in shares of the Assessee Company remained unexplained, liability could ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ered 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." 41. Further, our attention was drawn to 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 question raised in this appeal is whether the Commissioner of Income-tax (Appeals) and the Tribunal below erred in law in deleting the addition of Rs. 8,52,000/-, Rs. 91,50,000/- and Rs. 13,00,000/- made by the Assessing Officer on account of share capital, share application money and investment in HTCCL respectively. After hearing Md. Nizamuddin, learned Advocate appearing on behalf of the appellant and after going through the materials on record, we find that all such application money were received by the assessee by way of account payee cheques and the assessee also disclosed the complete list of shareholders with their complete addresses and GIR ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ts can be discerned: (a) The First Ld. Pr. CIT has recorded a finding after perusal of the first assessment records/folder that during the first round of scrutiny proceeding, the assessee company as well as the share subscribers pursuant to notice u/s 133(6) of the Act produced the following documents before the first AO in the original assessment to satisfy the AO in respect of identity, creditworthiness and genuineness of share subscribers (Refer PBI page 61-272 and PBIII pages 64-492): (i) audited financial statements; (ii) copy of Form filed with the ROC; (iii) copy of PAN Card of the assessee company; (iv) details and copy of share applicants; (v) bank statement reflecting the transaction; (vi) Memorandum of Association and Article of Association (vii) records relating to investors in order to establish identity, genuineness and creditworthiness of the share subscribers. 43. We note that the First Ld. Pr. CIT in his first revisional order, found that AO in the first assessment proceedings though has been provided with the aforesaid documents has not examined these documents, which according to him, should have been carried out by the AO. The First Ld. Pr. CIT a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... z., (i) copy of ITR, (ii) audited accounts, (iii) details of directors, (iv) the details of the share-applicants, (v) details of business activity, (vi) details of increase in share capital, (vii) Form 2, (viii) Form 5, (ix) bank statements evidencing payment through banking transaction, which fact the AO has acknowledged in the reassessment order. [And here we should keep in mind that the First Ld. Pr. CIT's finding of fact after perusal of original assessment records that assessee in the first round before AO has produced PAN, ROC details, audited financial statements, details and copy of share applicants, bank statements reflecting the transaction, records relating to investors to establish identity, creditworthiness & genuineness. And the finding of First Ld. Pr. CIT that AO had issued notice u/s 133(6) of the Act to all share subscribers and pursuant to the same all the share applicants have replied along with documents to prove their identity, creditworthiness and genuineness. (Refer page 64-492 PBIII and pages 61-272 PBI)]. Thus from a perusal of the documents, we note that the identity of the investors were duly furnished by the assessee and the veracity of the same need no ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... heet as on 31.03.2012 as well as the sum invested by them in the assessee is discernible as under: SL NO NAME OF ALLOTTEE Amount invested in assessee company Networth as per audited accounts Networth, refer P/b Page No. Bank Statement enclosed at Page No. Source of Funds enclosed at P/b, page 1 Paritosh Suppliers Pvt Ltd 1,00,00,000 4,85,86,486 73 80 83 2 Nirvaanam Properties Pvt Ltd 1,10,00,000 7,67,03,339 97 105 111 3 Mangalvarsha Infraprojects Pvt Ltd 2,59,00,000 10,85,94,050 125 132 136 4 Link Dealres Pvt Ltd 55,00,000 5,12,96,509 148 156 139 5 Earmark Infraprojects Pvt Ltd 40,00,000 2,36,02,831 172 179 182 6 Casio Commosales Pvt Ltd 55,00,000 5,11,38,356 194 201 204 7 Blockdeal Advisory Services Pvt Ltd 2,20,00,000 7,70,03,774 219 227 207 8 Derby Realbuild Pvt Ltd 89,00,000 6,61,04,194 261 268 272 48. So, from a perusal of the above chart, we note that the assessee and the shareholders have brought to the notice of Second AO that they (share subscribers) have enough net worth to invest in the assessee company and the share subscribing companies pursuan ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... u/s 133(6) of the Act. A copy of its Income Tax Return Acknowledgment for AY 2012-13 is placed at page 63 of the paper book. On perusal of Audited Accounts of this share applicant (Page 64-79), it is noted that its Net-worth (Share Capital plus Reserves and Surplus) as on 31.03.2012 was Rs. 4,85,86,486/-, page 73 of the paper book and the investment made in the assessee-company including share premium was Rs. 1,00,00,000/-. Entire Share Application money of Rs. 1,00,00,000/- was received by the assessee through normal banking channels on 29-03-2012. The financial statement of this share applicant shows that it had enough funds to invest in the assessee-company and the transaction has happened through normal banking channels. Further, it is noted that the share applicant had furnished the source of investment made in the assessee-company after getting the notice under section 133(6) of the Act. 2. Nirvaanam Properties Pvt Ltd On perusal of the paper book-1, it reveals that documents are found placed at page 84- 111 PBI of share applicant, Nirvaanam Properties Pvt Ltd, which is a Private Limited Company and which has Permanent Account No. AADCN8752E and CIN U70109WB2012PTC172134.W ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... is share applicant shows that it had enough funds to invest in the assessee-company and the transaction has happened through normal banking channels. Further, it is noted that the share applicant had furnished the source of investment made in the assesseecompany after getting the notice under section 133(6) of the Act. 4. Link Dealers Pvt Ltd On perusal of the paper book-1, it reveals that documents are found placed at page 137-158 of share applicant, M/s Link Dealers Pvt Ltd, which is a Private Limited Company and which has Permanent Account No. AABCL6216H and CIN U52100WB2009PTC135729. We note that this share applicant has filed its Pan Card, ITR acknowledgment, source of funds, Allotment Advice issued by the assessee company, relevant Bank Statement and audited accounts in response to the notice issued u/s 133(6) of the Act. A copy of its Income Tax Return Acknowledgment for AY 2012-13 is placed at page 140 of the paper book. On perusal of Audited Accounts of this share applicant (Page 141-154), it is noted that its Net-worth (Share Capital plus Reserves and Surplus) as on 31.03.2012 was Rs. 5,12,96,509/-, page 148 of the paper book and the investment made in the assessee-com ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... accounts in response to the notice issued u/s 133(6) of the Act. A copy of its Income Tax Return Acknowledgment for AY 2012-13 is placed at page 185 of the paper book. On perusal of Audited Accounts of this share applicant (Page 186-200), it is noted that its Net-worth (Share Capital plus Reserves and Surplus) as on 31.03.2012 was Rs. 5,11,38,355 /-, page 194 of the paper book and the investment made in the assessee-company including share premium was Rs. 55,00,000/-. Entire Share Application money of Rs. 55,00,000/- was received by the assessee through normal banking channels on 19-03-2012. The financial statement of this share applicant shows that it had enough funds to invest in the assessee-company and the transaction has happened through normal banking channels. Further, it is noted that the share applicant had furnished the source of investment made in the assessee-company after getting the notice under section 133(6) of the Act. 7. Block deal Advisory Services Pvt Ltd On perusal of the paper book-1, it reveals that documents are placed at page205-249 of share applicant, M/s Block deal Advisory Services Pvt Ltd which is a Private Limited Company and which has Permanent Acc ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... share applicant had furnished the source of investment made in the assesseecompany after getting the notice under section 133(6) of the Act. 49. So, from the aforesaid facts revealed during the second round, we note that second AO has made enquiries as per the direction of the First Ld. Pr.CIT dated 28- 03-2016 u/s. 263 of the Act (First 263 order). On examination of the submissions made by the assessee and the share applicants and the documents available in the assessment records, the second AO observed that, "The assessee company furnished all the documents as required related to second source. Records were test checked received from the parties proving identity of parties, genuinity of transactions, creditworthiness and again it was observed that all the transactions were made through banking channel and duly recorded in the books of accounts of the parties. Accordingly it is inferred that: (i) As the shareholders were private limited companies and registered with the Ministry of Corporate Affairs they have an established identity. (ii) Details of source of funds have been submitted by all the shareholders. (iii) None of the applicants have been made otherwise than ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... al and premium collected from the share subscribers was a plausible view which is not a unsustainable view in law. 49. So, from the aforesaid facts revealed during the second round, we note that AO has discharged his duty as an Investigator and enquired as per the direction of the First Ld. Pr. CIT to conduct de-novo assessment dated 28.03.2016 u/s. 263 of the Act (First 263 order) and thus, we note that when the second AO while framing the reassessment order pursuant to the direction of the First Ld. Pr. CIT's order dated 28.03.2016 (first revisional order) has conducted inquiry and after perusal of the documents running more than 300 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 fact that the share subscribers responded to sec. 133(6) notice and produced all documents along with the audited financial statements and other documents referred (albeit in the first round) supra, the assessee had discharged the onus upon it about the identity creditworthiness and genuineness of the share capita ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... d discussed is definitely a possible view, so in the factual background discussed in detail, we are of the considered opinion that Ld. second Pr. CIT ought not to have interfered with the AO's reassessment order which in any case can be classified as 'unsustainable in law' since it is in line with plethora of judicial decisions of the subject. 51. To sum up, we find from the above said facts that the Second AO has conducted enquiry on the specific subject matter i.e. share capital and premium collected by the assessee-company (CASS items). Therefore, the finding of Second Pr. CIT that the Second AO has not conducted enquiry is incorrect and is flowing from suspicion only. And as discussed, the allegation/fault pointed out by the Second Ld. Pr. CIT that the Second AO failed to collect total facts also cannot be accepted for the simple reason that Ld. Pr. CIT has not spelt out in the impugned order what he meant by total facts or in the alternative when the assessee has discharged its onus, as required by the law in force in this AY 2012-13, then the Ld. Pr. CIT ought to have called for which ever additional documents/materials or issued summons or issued notices and collected those ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... st revisional order of the First Ld. Pr. CIT and on the very same subject matter which inter alia was the issue flagged by CASS, which exercise since having been complied by the AO, brings into operation the doctrine of merger the subject matter i.e. share capital & premium collected by assessee company. Resultantly the second Ld. Pr.CIT, again cannot rake-up the same subject matter without the second Ld. Pr.CIT in the second revisional order spells out where the error happened to second AO as an investigator or adjudicator, which exercise the Second Ld. Pr.CIT has not done, so the second Ld. Pr. CIT cannot be permitted to again ask the AO to start the investigation in the way he thinks it proper on the very same subject on which merger has taken place by virtue of the order of First Ld. Pr. CIT. And if this practice is allowed, then there will be no end to the assessment proceedings meaning no finality to assessment proceedings and that is exactly why the Parliament in its wisdom has brought in safe-guards, restrictions & conditions precedent to be satisfied strictly before assumption of revisional jurisdiction. Be that as it may be, as discussed above, we find that the Second Ld. ..... X X X X Extracts X X X X X X X X Extracts X X X X
|
