TMI Blog2022 (1) TMI 879X X X X Extracts X X X X X X X X Extracts X X X X ..... of the First Ld. Pr. CIT's order dated 9.02.2016 (first revisional order) has complied with the specific directions of the First Ld. Pr. CIT and based on the inquiry conducted and after perusal of the documents running more than 200 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 albeit in the first round and in the second round, the Directors of all investors pursuant to summons u/s. 131 appeared before second AO and produced all documents along with the audited financial statements and other documents referred supra, the assessee had discharged the onus upon it about the identity creditworthiness and genuineness of the share capital and premium collected by the assessee from the respective share subscribers. Since the aforesaid exercise was carried out by the second AO in the reassessment proceedings and the documents referred to above are in the assessment folder, the Second Ld. Pr. CIT erred in holding the reassessment ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... essment order due to the failure of second AO's omission to collect the additional documents. 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. Pr. CIT without satisfying the condition precedent u/s. 263 of the Act has invoked the revisional jurisdiction (second time), so all his actions are ab initio void CIT(A) has made a bald statement that the AO's a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... order with the direction to examine the books of account of the assessee company as well as the books of account of share subscriber companies and to examine the source of share application money, identity of the investors and its genuineness after giving the assessee proper opportunity of being heard. Thereafter, the Ld. Pr. CIT-4, Kolkata passed a specific direction which is reproduced as under: Considering the facts and circumstances of the case as discussed above and as per the submission of the assessee, the assessment order was passed without making inquiries or verifications which should have been made and therefore the order passed on 21.03.2015 stands erroneous insofar as prejudicial to the interest of the revenue and is set aside de novo with a direction to the AO to carry out proper examination of the books of accounts and bank accounts of assessee as well as investors. AO is also directed to examine the source of share application, identity of investor and its genuineness. The assessment proceedings may be initiated at the earliest and to be completed without waiting time barring date. The AO must provide sufficient opportunity of being heard to the assessee ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ng the legal issue which is against the action of the Ld. Pr. CIT to have usurped the jurisdiction (revisional) u/s. 263 of the Act without fulfilling the essential condition precedent as laid down in section 263 of the Act. Since it is a legal issue and if it is decided in favour of the assessee which goes to the root of the matter, therefore, this issue is taken up first for adjudication. 5. Assailing the action of the Ld. Pr. CIT the Ld. AR Shri Miraj D. Shah contended that the second Ld. Pr. CIT erred in exercising for the second time revisional jurisdiction u/s. 263 of the Act which action of his was wholly without jurisdiction. According to him, the Ld. Pr. CIT ought not to have invoked the revisional jurisdiction since the second AO had framed the reassessment pursuant to the first revisional order of the first Ld. Pr. CIT dated 09.02.2016 which impugned action of the Ld. Second pr. CIT is without satisfying the requisite condition precedent as stipulated in section 263 of the Act and so bad in law. According to the Ld. AR, the first Ld. Pr. CIT while passing first revisional order dated 09.02.2016 has given specific direction while setting aside the original first assess ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nt to the summon of AO u/s. 131 of the Act and the AO had acknowledged to have perused the copy of bank statements of all of these companies and in that process has verified their share transactions with the assessee company and the AO has recorded in the order sheet that the directors of all the share subscribing companies' statements were recorded by him. On 31.05.2016 the following share subscribing companies directors also appeared before the AO:- (i) M/s. Gliter Pvt. Ltd., (ii) M/s. Kamna Sales Pvt. Ltd., (iii) Twister Vincom Pvt. Ltd., (iv) M/s. Cherry Marcom Pvt. Ltd., (v) M/s. Action Tie Up Pvt. Ltd., (vi) M/s. Integral Distributors Pvt. Ltd. and (vii) M/s. Vayu Marketing Pvt. Ltd. 6. Moreover, according to Shri Miraj, on 15.06.2016 the Ld. AR of the assessee appeared with the assessee's books of account, bills, vouchers, bank statements, details of the enhancement of the share capital etc. The AO has recorded in the order sheet that he has verified the books of account and copy of bank statement. Thus, according to Ld. AR, the AO has gone through the books of account of the assessee as well as the books of account of the invest ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... sk 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 Ld. A.R., the conditions precedent 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 Shri Miraj, 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) to section 56 of the Act by which the share premium could have been ascertained and brought to tax. Shri Miraj Shaw also pointed out that only from AY 2013-14, the AO when considering section 68 of the Act could have even looked for the second source of the share capital premium. In this assessment year (AY 2012-13) the onus on the assessee in respect of credit found in the books was confined to ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the Act to all the share applicants/subscribers and the AO records in his order sheet that the directors of the share subscribing companies appeared before him with their books of account and the AO had acknowledged to have perused the copy of bank statements of all of these companies and in that process has verified their share transactions with the assessee company and that the directors statements were recorded by him wherein they conceded the fact that all of them had given their confirmation of subscribing to the share capital and premium in assessee's company as well as their source of income for applying for the share capital and premium. Thus it was pointed out by the Ld. AR 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 Ld. AR, the second AO has conducted enquiries and has recorded these facts in the order sheet place in PB pages 18-22 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 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... er u/s. 263 of the Act on 09-02-2016, wherein he was pleased to set aside the original assessment order dated 21-03-2015 and directed denovo assessment along with the specific direction to inquire about the collection/allotment of share subscription/share capital premium. 9. Pursuant to the direction of the First Ld. Pr.CIT dated 09-02-2016, the second AO framed the de-novo re-assessment order dated 17-06-2016, 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 ₹ 20,41,00,000/- and made further addition of ₹ 57,482/- u/s. 14A of the Act. Thereafter, the new incumbent in the office of Pr. CIT-4, Kolkata issued show cause notice dated 24-2-2019 (hereinafter referred to as the Second SCN) and conveyed his intention to revise the reassessment/second assessment order of the second AO dated 17-06-2016. After hearing the assessee, the second Ld. Pr. CIT has set aside the said reassessment/second assessment order of the AO dated 17-06-2016, wherein the Second Ld. Pr. CIT, Kolkata-4, Kolkata vide order dated 26-03-2019 directed the AO to pass a fresh assessment order. 10. A ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... er 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. 11. Taking note of the aforesaid dictum of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... lowed. Since the total expenses as debited in its profit Loss Account being of ₹ 57,482/-. The disallowance u/s. 14A is to be restricted to the tune of ₹ 57,482/-. 13. Thereafter, the Second Ld. Pr. CIT issued show cause notice (hereinafter referred to as the second SCN) dated 24-2-2018 pointing out certain faults in the AO's second assessment/re-assessment order dated 17.06.2016: 14. Thereafter, the Second Ld. Pr.CIT on 26.03.2019 was again pleased to set aside the re-assessment/second assessment order of the AO dated 17-06-2016 and directed fresh assessment (which means a third assessment to be framed). 15. The aforesaid action of the Second Ld. Pr. CIT dated 26-03-2019 is challenged before us. According to the Ld. Counsel, Shri Miraj D. Shah the Ld. Pr. CIT erred in assuming his jurisdiction without satisfying the jurisdictional conditional precedents as prescribed u/s. 263 of the Act and therefore, the action of the Ld. Pr. CIT is wholly without jurisdiction and therefore, ab-initio void and 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 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... re placed on records. (b) The AO in the assessment order, simply added the share capital received by assessee as undisclosed cash credit u/s. 68 of the IT Act on the ground that the assessee fell far short of discharging the onus of the assessee in the matter of explaining the sources of the said share capital in question . However, in the assessment order, AO did not discuss about submission furnished by us. (c) In course of assessment proceedings, the A.O. issued notice u/s. 133(6) to all share applicants and the details/documents asked by assessing officer were duly furnished by all share applicants and AO in the assessment order also discussed that Notices u/s. 133(6) issued and duly received , but while passing the assessment order, A.O. did not discuss about any adverse findings drawn from reply received in respect of notice u/s. 133(6), which also evidences that those reply were not examined and simply placed in records. (d) In course of assessment proceedings, identity, creditworthiness and genuineness of share capital received were proved but in the assessment order, the AO discussed that the share capital received by assessee was not verifiable from docum ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ments, which according to him, should have been carried out by the AO. Further, the First Ld. Pr. CIT found fault with the AO's order for not even recording in the order sheet the issuance of notice u/s. 133(6) of the Act and the fact of having received the replies from all the share applicants. The Ld. PCIT also noted that summons u/s. 131 was issued, pursuant to which the assessee filed written submission, which was not mentioned in the order sheet. Thus, the Ld. Pr. CIT found fault with the AO's order in not verifying the documents submitted by the assessee/share subscribers pursuant to notice u/s. 142(1)/133(6) of the Act as well as in not discussing how the AO discarded these material/evidence and for not discussing the basis of evidence on which the AO could conclude that assessee had failed to discharge its onus in the matter of explaining the source of the share capital, without any adverse material to rebut the evidence submitted by the assessee/share subscribers. The First Ld. Pr. CIT found fault with the AO for not bothering to examine the written submission as well as the documents filed by the assessee or to bring on record anything against the assessee and acc ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e note that pursuant to the aforesaid direction of the First Ld. Pr. CIT (first revisional order) dated 09-02-2016, the Second AO has recorded in his order-sheet noting that he had issued notice u/s. 142(1) on 17-03-2016 and 07.04.2016. Pursuant to the notices, the assessee the filed/produced the following documents:- i) Copy of ITR (Income Tax Returns) ii) Audited accounts iii) Computation of income iv) Details of business activities v) Details of investment/share capital, viz Allotment advice, Form 18 as a proof of address, bank transaction high lighting the share transaction, Balance sheet, copy of Director's PAN card, etc vi) Form 2 and From 5 vii) List of shareholders viii) Details of bank accounts 21. The Second AO acknowledges in his order sheet as on 19.5.2016 that he had issued summons u/s. 131 of the Act and pursuant to which thirteen (13) share subscribing companies respective Directors had appeared before him on 30/31.05.2016, and they were examined along with their respective books of accounts and bank statement and has admitted to have verified the share transaction with assessee company and their statements have been rec ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... , the AO in the second round has not enquired about the share capital premium collected by the assessee. For that we need to carefully examine as to whether the second AO has carried out his dual role as an investigator as well as an adjudicator while deciding the issue of share capital and premium collected by the assessee for AY 2012-13. Before we examine about the investigative role of the AO, we need to examine the law as it stood in AY 2012-13 and is applicable in this case. As on date, Section 68 of the Act reads as under:- Section 68: Where any sum is found credited in the books of an assessee maintained for any previous year, and the assessee offers no explanation about the nature and source thereof or the explanation offered by him is not, in the opinion of the Assessing Officer, satisfactory, the sum so credited may be charged to income tax as the income of the assessee of that previous year: Provided that where the assessee is a company (not being a company in which the public are substantially interested), and the sum so credited consists of share application money, share capital, share premium or any such amount by whatever name called, any explanation offer ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... or (ii) By a company from a class or classes of persons as may be notified by the Central Government in this behalf. Explanation-For the purposes of this clause, (a) The fair market value of the shares shall be the value- (i) As may be determined in accordance with such method as may be prescribed, or (ii) As may be substantiated by the company to the satisfaction of the Assessing Officer based on the value, on the date of issue of shares, of its assets, including intangible assets being goodwill, know-how, patents, copyrights, trademarks, licences, franchises or any other business or commercial rights of similar nature. Whichever is higher: (b) Venture capital company, 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] . ******** 28. So we note that in this assessment year before us i.e. AY 2012-13, the law in force was that if any sum is found credited in the books of an assessee in a financial year and, if the AO asks for the explanation of assessee in respect of the nature and source thereof, then the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... earned DR when the income of the assessee is meager, the action of the share subscribing companies in giving astronomical prices for the shares is against preponderance of probabilities and cited the decision of the Hon'ble Supreme Court as well as Delhi High Court in CIT vs. N.R. Portfolio Pvt. Ltd. Further, according to Ld. AR in the case of unlisted companies, it is common knowledge that premium fixed is a matter of mutual agreement and ITAT Mumbai in the case of Gagandeep Infrastructure Pvt. Ltd., (supra) has held that it is a prerogative of the Board of Directors of the company to decide the premium amount and it is the wisdom of the shareholders whether they want to subscribe to such a heavy premium. And the aforesaid view of the ITAT has been upheld by the Hon'ble Bombay High Court order dated 20th March 2017. Further the Hon'ble High Court observed as under- (i) We find that the proviso to Section 68 of the Act has been introduced by the Finance Act 2012 with effect from 1st April, 2013. Thus it would be effective only from the Assessment Year 2013-14 onwards and not for the subject Assessment Year. In fact, before the Tribunal, it was not even the ca ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... lso cannot bring to tax such share premium within the provisions of section 68 of the Act, before (supra) held that Proviso inserted to section 68 is prospective in nature. Hon'ble M.P. High Court in the case of CIT vs. Chain House International (P) Ltd., order dated 07.08.2018, decision reported in 98 taxmann.com 47 has held at para 52 as under- Issuing the share at a premium was a commercial decision. It is the prerogative of the Board of Directors of a company to decide the premium amount and it is the wisdom of shareholder whether they want to subscribe the shares at such a premium or not. This was a mutual decision between both the companies. In day to day market, unless and until, the rates if fixed by any Govt. Authority or unless there is any restriction on the amount of share premium under any law, the price of the shares is decided on the mutual understanding of the parties concerned.. . (C) The Mumbai Tribunal in the case of ACIT-1(1) vs. M/s. Gagandeep Infrastructure Pvt. Ltd. the ITAT has held as under: We have carefully perused the orders of the lower authorities. In our considered view, the issue of shares at premium is always a commercial d ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... received for such shares as exceeds the fair market value of the shares: Provided that this clause shall not apply where the consideration for issue of shares is received- (iii) By a venture capital undertaking from a venture capital company or a venture capital fund, or (iv) By a company from a class or classes of persons as may be notified by the Central Government in this behalf. Explanation-For the purposes of this clause, (c) The fair market value of the shares shall be the value- (iii) As may be determined in accordance with such method as may be prescribed, or (iv) As may be substantiated by the company to the satisfaction of the Assessing Officer based on the value, on the date of issue of shares, of its assets, including intangible assets being goodwill, know-how, patents, copyrights, trademarks, licences, franchises or any other business or commercial rights of similar nature, whichever is higher: (d) Venture capital company, 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 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... High Court can only decide a question if it had been raised before the Tribunal even if not determined by the Tribunal. Therefore, no occasion to consider the question as prayed for arises. (c) In any case, we may point out that the amendment to section 68 of the Act by the addition of proviso thereto took place with effect from April 1, 2013. Therefore, it is 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. (d) We may also point out that decision of this court in Major Metals Ltd. v. Union of In ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... frastructure (P.) Ltd. [2017] 80 taxmann.com 272/247 Taxman 245/394 ITR 680 (Bom.) has while refusing to entertain a question with regard to section 68 of the Act has held that the proviso to section 68 of the Act introduced with effect from April 1, 2013 will not have retrospective effect and would be effective only from the assessment year 2013-14. (c) In view of the above question No. B as proposed also does not give rise to any substantial question of law as it is an issue concluded by the decision of this court in Vodafone India Services (P.) Ltd. (supra) and in the apex court in G.S. Homes and Hotels (P.) Ltd. (supra). Thus not entertained. 34. Relying on the aforesaid judicial precedents of Hon'ble High courts and the Tribunal, we are of the opinion that in this AY i.e. AY 2012-13, the amendment in section 68 of the Act took place wherein the addition of proviso was with effect from 01.04.2013 and so is not applicable in this AY 2012-13. Further, as noted, the definition of income as provided under section 2(24) of 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. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... assessee (in whose books of account credit appears) stands fully discharged if the identity of the creditor is established and actual receipt of money from such creditor is proved. In case, the Assessing Officer is dissatisfied about the source of cash deposited in the bank accounts of the creditors, the proper course would be to assess such credit in the hands of the creditor (after making due enquiries from such creditor). In arriving at this conclusion, the Hon'ble Court has further stressed the presence of word may in section 68. The Hon'ble Apex Court ratio was taken note by the Hon'ble Gujarat High Court in the case of Dy. CIT vs. Rohini Builders (2002) 256 ITR 360 wherein the Hon'ble High Court observed at pages 369 and 370 of this order are reproduced hereunder:- Merely because summons issued to some of the creditors could not be served or they failed to attend before the Assessing Officer, cannot be a ground to treat the loans taken by the assessee from those creditors as non-genuine in view of the principles 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 w ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... erpretation of statutes, when we read carefully the provisions of section 68, we notice nothing in section 68 to show that the scope of the inquiry under section 68 by the Revenue Department shall remain confined to the transactions, which have taken place between the assessee and the creditor nor does the wording of section 68 indicate that section 68 does not authorize the Revenue Department to make inquiry into the source(s) of the credit and/or sub-creditor. The language employed by section 68 cannot be read to impose such limitations on the powers of the Assessing Officer. The logical conclusion, therefore, has to be, and we hold that an inquiry under section 68 need not necessarily be kept confined by the Assessing Officer within the transactions, which took place between the assessee and his creditor, but that the same may be extended to the transactions, which have taken place between the creditor and his sub-creditor. Thus, while the Assessing Officer is under section 68, free to look into the source(s) of the creditor and/or of the sub-creditor, the burden on the assessee under section 68 is definitely limited. This limit has been imposed by section 106 of the Evidence Ac ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... orthiness has to be Judged vis-a-vis. the transactions, which have taken place between the assessee and the creditor, and it is not the business of the assessee to find out the source of money of his creditor or of the genuineness of the transactions, which took between the creditor and sub-creditor and/or creditworthiness of the sub-creditors, for, these aspects may not be within the special knowledge of the assessee. ********** ... If a creditor has, by any undisclosed source, a particular amount of money in the bank, there is no limitation under the law on the part of the assessee to obtain such amount of money or part thereof from the creditor, by way of cheque in the form of loan and in such a case, if the creditor fails to satisfy as to how he had actually received the said amount and happened to keep the same in the bank, the said amount cannot be treated as income of the assessee from undisclosed source. In other words, the genuineness as well as the creditworthiness of a creditor have to be adjudged vis-a-vis. the transactions, which 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 a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ntrary. On mere failure on the part of the creditors to show that their sub-creditors had creditworthiness to advance the said loan amounts to the assessee, such failure, as a corollary, could not have been and ought not to have been, under the law, treated as the income from the undisclosed sources of the assessee himself, when there was neither direct nor circumstantial evidence on record that the said loan amounts actually belonged to, or were owned by, the assessee. Viewed from this angle, we have no hesitation in holding that in the case at hand, the Assessing Officer had failed to show that the amounts, which had come to the hands of the creditors from the hands of the sub-creditors, had actually been received by the sub-creditors from the assessee. In the absence of any such evidence on record, the Assessing Officer could not have treated the said amounts as income derived by the appellant from undisclosed sources. The learned Tribunal seriously fell into error in treating the said amounts as income derived by the appellant from undisclosed sources merely on the failure of the sub-creditors to prove their creditworthiness. 38. Further, in the case of CIT v. S. Kamaljeet ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... istence of creditors and saddled the addition, which was overturned by Ld. CIT(A). However, the Tribunal reversed the decision of the Ld. CIT(A) and upheld the AO's decision, which action of Tribunal was challenged in the Hon'ble High Court, Calcutta in the case of Crystal Networks (P.) Ltd. v. Commissioner of Income-tax 353 ITR 171 wherein the Tribunal's decision was overturned and decision of Ld. CIT(A) upheld and the Hon'ble High Court held that when the basic evidences are on record the mere failure of the creditor to appear cannot be basis to make addition. The court held as follows: 8. Assailing the said judgment of the learned Tribunal learned counsel for the appellant submits that Income-tax Officer did not consider the material evidence showing the creditworthiness and also other documents, viz., confirmatory statements of the persons, of having advanced cash amount as against the supply of bidis. These evidence were duly considered by the Commissioner of Income-tax (Appeals). Therefore, the failure of the person to turn up pursuant to the summons issued to any witness is immaterial when the material documents made available, should have been accepted a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... lready stated as to what should be the duty of the learned Tribunal to decide in this situation. In the said judgment noted by us at page 464, the Supreme Court has observed as follows: The Income-tax Appellate Tribunal performs a judicial function under the Indian Income-tax Act; it is invested with authority to determine finally all questions of fact. 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 law. 11. The Tribunal must, in deciding an appeal, consider with due care all the material facts and record its finding on all contentions raised by the assessee and the Commissioner, in the light of the evidence and the relevant law. It is also ruled in the said judgment at page 465 that if the Tribunal does not discharge the duty in the manner as above then it shall be assumed the judgment of the Tribunal suffers from manifest infirmity. 12. Taking inspiration from the Supreme Court observations we are constrained to hold in this matter that the Tribunal has not adjudicated upon the case of th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... no reason to interfere with the concurrent findings of fact recorded by both the authorities. 42. 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. 43. Our attention was also drawn to the decision of the Hon'ble Calcutta High Court while relying on the case of Lovely Exports, in the appeal of COMISSIONER OF INCOME TAX, KOLKATA-IV Vs. ROSEBERRY MERCANTILE (P) LTD., ITAT No. 241 of 2010 dated 10-01-2011 has held: On the facts and in the circumstances of the case, Ld. CIT(A) ought to have upheld the assessment order as the transaction entered into ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... uction 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 question. The learned Commissioner of Income Tax Appeals found that there were as many as 2155 allottees, whose names, addresses and respective shares allocation had been disclosed. The Commissioner of Income Tax Appeals, further found that the Assessee Company received the applications through bankers to the issue, who had been appointed ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... eral 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 view that there is no question of law involved in this appeal far less any substantial question of law. The learned Tribunal has concurred with the learned Commissioner on facts and found that there were materials to show that the assessee had disclosed the particulars of the shareholders. The factual findings cannot be interfered with, i ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... er 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. 46. In the light of the aforecited judicial precedents, let us examine the case in hand and find out whether pursuant to the specific direction of First Ld. Pr. CIT, the second AO has discharged his role as an investigator in respect of share capital and premium collected by the assessee or whether the AO failed to enquire on this issue and whether his re-assessment/second assessment order is a plausible view or it can be termed as an unsustainable view in law. We on a conjoint reading of the First Revisional Order of the First Pr. CIT dated 09/2/2016 and the reassessment/Second assessment of the AO dated 07.06.2016, the following f ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... documents has not examined these documents, which according to him, should have been carried out by the AO. The First Ld. Pr. CIT at para (5) of his first revisional order has clearly made a finding that: 5. It is seen from the records that the assessee furnished copy of financial statement such as Audited balance sheet P L Account of the assessee and all the shareholders Bank Statements, ROC details of etc 17.07.2014. The AO issued notice u/s. 142(1) on 27.07.2014 requesting assessee to furnish various details/documents, in reply of notice u/s. 142(1) u/s. 142(1), the assessee furnished on 10.09.2014 all required documents. All details/documents produced by assessee were simply placed on records, which are verifiable. After gap of 5 months, at the fag end of time barring limitation, the AO issued notices u/s. 133(6) to all share applicants. However, the AO in the order sheet, neither made entry of issuance of notice u/s. 133(6) nor regarding its compliance. The assessing officer, in the assessment order mentioned that notice u/s. 133(6) issued and reply received, but, those reply were neither recorded in order sheet nor examined. The AO on 20.02.2015 issued summ ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... us). He also directed that the assessment proceedings to be initiated at the earliest and to be completed without waiting for time bar limit. With the aforesaid specific direction, the First Ld. Pr. CIT has set aside the first original assessment order dated 21-03-2015. 49. So we note that the second AO was specifically directed by the First Ld. Pr. CIT to carry out the followings actions in addition to de-novo assessment which means the second AO is free to assess the income of assessee afresh, however, he has to do the following specific actions as directed in respect of share-applicants who applied for shares in assessee-company. The specific directions of Ld. Pr CIT to AO are as under: (i) To carry out proper examination of the books of accounts and bank account of the assessee; ii) To carry out proper examination of the books of accounts and bank account of the investors; iii) AO to examine the source of the share applicants; iv) The AO to examine the identity of the investor and its genuineness; v) The AO to complete the assessment at the earliest without waiting for the time barring date. 50. In the second round before the AO for de-novo assess ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... irector and signature of Shri N.K. Mondal is also seen affixed. 53. Thereafter AO notes that Shri Narendra Kumar M, the director of M/s. Alex Tradecom Pvt. Ltd. (share subscribing company) appeared pursuant to the summons issued by the AO u/s. 131 of the Act. According to AO the director produced the regular books of accounts, copy of bank statement and he has verified the documents, transaction and has recorded the statement of the director and signature of Shri Narendra was also seen affixed. 54. Now coming to page 21 it is noted that the AO has recorded that on 31.05.2016 Shri V.A. Patel, the director of M/s. Vidhika Dealers Pvt. Ltd. (share subscribing company) appeared pursuant to the summons issued by the AO u/s. 131 of the Act. According to AO the director produced the regular books of accounts, copy of bank statement and he has verified the documents, transaction and has recorded the statement of the director and signature of Shri V.A. Patel was also obtained on it. 55. The AO notes that Shri Bipin Singh, the director of M/s. Crystal Dealermark Pvt. Ltd. (share subscribing company) appeared pursuant to the summons issued by the AO u/s. 131 of the Act. According to ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ffixed. 61. The AO notes that Shri Sindoor Vineet Mittal, the director of M/s. Integral Distributors Pvt. Ltd. (share subscribing company) appeared pursuant to the summons issued by the AO u/s. 131 of the Act. According to AO the director produced the regular books of accounts, copy of bank statement and he has verified the documents, transaction and has recorded the statement of the director and signature of Shri Sindoor Vineet Mittal is also seen affixed. 62. The AO also notes that Shri Manish Kumar Gupta, the director of M/s. Vayu Marketing Pvt. Ltd. (share subscribing company) appeared pursuant to the summons issued by the AO u/s. 131 of the Act. According to AO the director produced the regular books of accounts, copy of bank statement and he has verified the documents, transaction and has recorded the statement of the director and signature of Shri Manish Kumar Gupta is also seen affixed. 63. Now coming to page 21 the AO notes that Mr. Praveen Kumar, the AR of the assessee company appeared with the regular books of accounts, bills, vouchers and copy of bank statement. The details of enhancement of share capital has been verified by him from the books of accounts and ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... furnished by the assessee's A.R.; and the AO verified the veracity of the same from all the share applicants by issuing summons u/s. 131 of the Act and the AO had recorded the statements of the directors of all the thirteen (13) share applicant and moreover it is common knowledge that in this computer/digital era, the AO on a click of the mouse, could have easily verified the identity of the share applicant which is available in the website of Ministry of Corporate Affairs and the ITR Acknowledgments filed by them, will enable the AO to cross verify and collect details from the AO of the respective share applicants and independently from the Revenue's departmental data base. We note that all the share subscribing parties filed all the documents called for by the AO [PB-2, pages 1-88] and were also examined by the AO along with audited accounts from which these details show their identity i.e. their CIN, PAN ITR filling status are as follows:- Sl.No. Name of Company CIN PAN ITR filed for AY 2012-13 1 TWISTER VINCOM PVT. LTD. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... section 114 of Indian Evidence Act 1872, we presume the fact that the quasi-judicial act of the second AO have been regularly performed. And we also note that all the share-holders are regular income tax assessee's. Therefore in the light of the aforesaid documents discussed their identity cannot be disbelieved and the AO's satisfaction in respect of identity of the shareholders is a possible view and cannot be termed as unsustainable in law or facts. 52. Coming to the creditworthiness of the shareholders, our attention was drawn to the balance sheet of the shareholders (PB-2) which was filed before the AO and the Ld. Pr. CIT and we note that their source of investment and net worth as per balance sheet as on 31.03.2012 as well as the sum invested by them in the assessee is discernible as under: Sl.No. Name Relevant page No. Source of investment (Paper Book 2) Capital Reserve as on 31.03.2012 Relevant page No. showing capital (Paper Book 3) Sum Invested in the assessee company 1 TWISTER VINCOM PVT ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... O that they (share subscribers) have enough net worth to invest in the assessee company and the share subscribing companies pursuant to the AO's summons u/s. 131 of the Act have furnished through their Directors their respective audited accounts from which the aforesaid facts are clearly discernible and moreover the share subscribers have also filed before the second AO the source from which they subscribed to shares of assessee (though not required as per law in force for AY 2012-13), bank statement, audited balance sheet. Thus the assessee had discharged the onus on it about the creditworthiness of the share-holders. So we note that the source of the investments has been clearly brought to the notice of the second AO during the assessment/reassessment proceedings. Further, the bank statements of all the shareholders as well as that of assessee were filed before the AO, which revealed that the share capital and premium have been subscribed by them through banking channel (NEFT or cheque) which goes on to show that the assessee has discharged the onus in respect of genuineness of the transaction. Based on the documents and materials called for by the AO who accepted the same af ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... . The share application is seen to have been made by account payee cheque. This company was incorporated on 01/10/2010 and was having company identification number U52190WB2010PTC153717. This company has filed its return of income before ITO Ward 3(4), Kolkata and was having PAN AAECK1149H. This company was having a paid-up capital with free reserves and surplus of ₹ 33,01,02,415/- as on 31/03/2012. The copy of the Balance Sheet of the Company is found placed in the paper book 3 at page No. 91. The copy of the bank statement of the Company is found placed in the paper book 2 on page No. 22 On examination of the bank statement it is seen that there is no deposit of cash. The details of source of funds from which this company had made the share application are also available in the paper book 2 at page No. 23. The Director of this Company appeared in response to the summons issued u/s. 131 of the Act and produced their books of accounts, bank statements and their statements were recorded by the Assessing Officer and confirmed the transactions of share application before the assessing officer which was verified by him (Refer Order sheet page No. 19 PB-I). (c) M/s. Crystal D ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... any had made the share application is found placed in the paper book 2 at page No. 33. The Director of this Company appeared in response to the summons issued u/s. 131 of the Act and produced their books of accounts, bank statements and their statements were recorded by the Assessing Officer wherein it confirmed the transactions of share application before the assessing officer which was verified by the AO (Refer order sheet at page 19 PB-I). (e) M/s. Vidhika Dealers Pvt. Ltd.: Documents of this share subscribing company is found placed at pages 34 to 39 of PB-II and page 94 of PB-III. This Company invested a sum of ₹ 4,00,00,000/- in the appellant company. The share application is seen to have been made by account payee cheque. This company was incorporated on 04/10/2010 and was having company identification number U51101WB2010PTC153746. This company duly filed its return of income before ITO Ward 9(2), Kolkata and was having PAN AADCV4285A. This company was having a paid-up capital with free reserves and surplus of ₹ 33,00,72,636/- as on 31/03/2012. The copy of the Balance Sheet of the Company is found placed in the paper book 3 at page No. 94. The copy of the ba ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 011 and was having company identification number U52190WB2011PTC164702. This company has filed its return of income before ITO Ward 9(2), Kolkata and was having PAN AADCV7283J. This company was having a paid-up capital with free reserves and surplus of ₹ 89,57,52,560/- as on 31/03/2012. The copy of the Balance Sheet of the Company is found placed in the paper book 3 at page No. 96. The copy of the bank statement of the Company is found placed in the paper book 2 at page No. 49. On examination of the bank statement it will be seen that there is no deposit of cash. The details of source of funds from which this company had made the share application is found placed in the paper book 2 on page No. 50. The Director of this Company appeared in response to the summons issued u/s. 131 of the Act and produced their books of accounts, bank statements and their statements were recorded by the Assessing Officer wherein it confirmed the transactions of share application before the assessing officer which was verified by him (Refer Order sheet page 19 PB-I). (h) M/s. Integral Distributors Private Limited: Documents of this share subscribing company is found placed at Page 51 to 57 of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... to the summons issued u/s. 131 of the Act and produced their books of accounts, bank statements and their statements were recorded by the Assessing Officer wherein it confirmed the transactions of share application before the assessing officer which was verified by him (Refer Order sheet page 19 of PB-I). (j) M/s. Approach Dealers Pvt. Ltd. Documents of this share subscribing company is found placed at Page 63 to 74 of PB-II and page No. 99 of PB-III. This Company invested a sum of ₹ 2,00,00,000/- in the appellant company. The share application is seen to have been made by account payee cheque. This company was incorporated on 24/06/2011 and was having company identification number U74999WB2011PTC164128. This company duly filed its return of income before ITO Ward 10(1), Kolkata and was having PAN AAJCA6145Q. This company was having a paid-up capital with free reserves and surplus of ₹ 12,21,02,114/- as on 31/03/2012. The copy of the Balance Sheet of the Company is found placed in the paper book 3 at page No. 99. The copy of the bank statement of the Company is found placed in the paper book 2 at page No. 72-73. On examination of the bank statement it is seen that ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... n of income before ITO Ward 10(1), Kolkata and was having PAN AAGCP0817K. This company was having a paid-up capital with free reserves and surplus of ₹ 20,95,240/- as on 31/03/2012. The copy of the Balance Sheet of the Company is found placed in the paper book 2 at page No. 101. The copy of the bank statement of the Company is found placed in the paper book 2 at page No. 83. On examination of the bank statement it will be seen that there is no deposit of cash. The details of source of funds from which this company had made the share application is found placed in the paper book 2 at page No. 84. The Director of this Company appeared in response to the summons issued u/s. 131 of the Act and produced their books of accounts, bank statements and their statements were recorded by the Assessing Officer wherein it confirmed the transactions of share application before the assessing officer which was verified by him (Refer order sheet page 19 PB-I). (m) M/s. Oviation Vincom Pvt. Ltd.: Documents of this share subscribing company is found placed at Page 85 to 88 of PB-II and page No. 102 of PB-III. This Company invested a sum of ₹ 20,00,000/- in the appellant company. The s ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... o the specific directions given by his predecessor while passing the first revisional order on 23.08.2016. Thus, we note that when the second AO while framing the reassessment order pursuant to the specific direction of the First Ld. Pr. CIT's order dated 9.02.2016 (first revisional order) has complied with the specific directions of the First Ld. Pr. CIT and based on the inquiry conducted and after perusal of the documents running more than 200 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 albeit in the first round and in the second round, the Directors of all investors pursuant to summons u/s. 131 appeared before second AO and produced all documents along with the audited financial statements and other documents referred supra, the assessee had discharged the onus upon it about the identity creditworthiness and genuineness of the share capital and premium collected by the assessee from the respective share subscribers. Sin ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ord to upset the AO's satisfaction in respect of identity, creditworthiness or genuineness of the share subscribers and thus recorded a finding of fact that the decision of AO's enquiry was faulted or wrong and in that process tried to show that it has resulted in a view which is unsustainable in law which would have justified his action of passing the impugned order u/s. 263 of the Act, which unfortunately is not the case. Since the AO's view on the facts collected and 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 on the subject. 56. To sum up, we find from the above said facts that the Second AO has conducted enquiry as directed by the First Ld. Pr. CIT on the specific subject matter i.e. share capital and premium collected by the assessee-company. Therefore, the finding of Second Pr. CIT that the Second AO has not conducted enquiry is incorrect and is flowing from suspicion ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... who is a quasi-judicial office has discharged his dual role as an investigator as well as an adjudicator. Looking from another angle of doctrine of merger canvassed before us, we note from the facts of this case that the second Ld. Pr. CIT - 4 by passing the second revisional order dated 26.03.2019 has substituted the First Pr. CIT's order passed u/s. 263 of the Act dated 9.02.2016 with his own order which he cannot do since the second assessment order/re-assessment of the Second AO dated 17.06.2016 was pursuant to the first revisional order of the First Ld. Pr. CIT and on the very same subject matter on which specific directions/instructions were given by the First Ld. Pr.CIT, which direction 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 ..... X X X X Extracts X X X X X X X X Extracts X X X X
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