TMI Blog2022 (5) TMI 356X X X X Extracts X X X X X X X X Extracts X X X X ..... ) of the Act to discharge the proof of identity, genuineness of the transaction. In the second round, the AO had acknowledged to have gone through the ITR, audited accounts, details of directions, share trading registered office, details of increase of share capital, Form 2 Form 5, shareholders list, bank a/c details and stated to have examined the same. Thereafter, the second AO has clearly stated that he has verified the documents and verified the documents submitted by them to prove their respective identity, creditworthiness genuineness of the share capital premium. We are of the considered opinion that the AO after verification of their PAN/CIN/ITR, has not drawn any adverse opinion or doubted the identity of the share applicants which view of AO is a possible view in the light of the documents referred to and also by applying the presumption in section 114 of Indian Evidence Act 1872, we presume that the quasi-judicial act of the second AO have been regularly performed. Second AO has conducted enquiry in respect of 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 co ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ks 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. Ld. CIT(A) has made a bald statement that the AO s assessment order attracts Explanation 2(c) u/s. 263 of the Act. However, he failed to spell out in his impugned order how the action of AO while framing the assessment order is not in accordance to any order, direction or instruction issued by the Board under section 119 of the Act. So, the deeming fiction as envisaged in Explanation (2) u/s. 263 of the Act cannot be used to interfere with the order of AO. This action of Ld. Pr. CIT is bad for non-application of mind. - ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... heir directors and all the documents to prove the identity, creditworthiness and genuineness of the share capital premium introduced into the company. However, according to the Assessing Officer, the directors failed to appear before him. According to him, the directors should have appeared before him, so he drew adverse inference against the assessee and made the entire addition of Rs. 9,97,00,000/- under section 68 of the Act by order dated 16.03.2015 (hereinafter referred to as the first assessment order). This action of First AO, was interdicted by the First Ld. PCIT by exercising his revisional jurisdiction u/s 263 of the Act to set aside the first assessment order passed under section 143(3) dated 21.03.2015. However in his order (first revisional order) the Ld. PCIT (first) after perusal of the first assessment order recorded finding of fact that that pursuant to the notices/requisition made by the first Assessing Officer, the assessee had furnished the audited books of account and other details requisitioned by him (AO) and that the details are available on records. The 1st Principal CIT noted that the First AO had in fact issued notices under section 133(6) of the Act to ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 6 by accepting the returned income under section 143(3) /263 of the Act (hereinafter referred to as the 2nd assessment/reassessment order). 5. In respect of the said 2nd assessment order/reassessment order dated 19.08.2016, the Ld. Pr. CIT -4 (hereinafter referred to as the 2nd Ld. PCIT), issued show-cause notice dated 24.12.2018 and conveyed his desire to exercise his revisional jurisdiction again u/s 263 of the Act. The 2nd Ld. Pr. CIT thereafter heard the assessee and passed the impugned order dated 11.03.2019, wherein he was pleased to again set aside the re-assessment order/2nd assessment order dated 19.08.2016 and directed denovo assessment (hereinafter referred to as the 2nd /impugned revisionary order of Second Ld. PCIT) by observing as under:- 7. I have carefully considered the submission of the assessee and perused the material available on record and found that the issue pointed out in the show cause needs verification. 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 insofar as it is prejudicial to the interest of revenue in accor ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... which the assessee s A.R appeal and produced (i) copy of the ITR (ii) audited accounts (iii) details of directors (iv) share trading (v) details of increase of share capital (vi) Form 2 Form 5 (vii) share holders list (viii) Bank account details. The second AO has acknowledged in his reassessment order that he has examined the details furnished before him. And that he has verified the identity, creditworthiness genuinety of share subscribers as well as the source of fund. Thus according to Ld. A.R. it can be safely interfered that the Second AO after having gone through the audited books of account of all the share applicants and Bank statements; and after verifying the genuineness of the documents submitted as well as the documents filed in the first round pursuant to 133(6) notice which were in the assessment records, was pleased not to draw any adverse inference against the share capital and premium collected by the assessee. Moreover according to the Ld. A.R., as directed by the 1st Ld. Pr. CIT, even the source of source was verified by the 2nd AO before being satisfied with the credit entries. Therefore, according to the Ld. A.R., when the 2nd AO as per the direction of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ve replied to the First Assessing Officer s notices/requisitions u/s 133(6) of the Act and filed all the documents called for by him, still according to Ld. First PCIT the action of the 1st AO without making any enquiry to draw adverse inference against the assessee despite all documents filed by the assessee only was against natural justice. And merely because the Directors of the assessee/share applicants did not turn up before him pursuant to the summons issued under section 131 of the Act, the addition made was due to pre-determined mind. The Ld. First PCIT taking note of the fact that despite all the documents being produced by the assessee/share applicants as per the requisitions by the First AO making high-pitched assessment is erroneous. The Ld. PCIT after going through the assessment records was of the opinion that there was violation of natural justice and also violation of Office Memorandum dated 07.11.2014 of CBDT and was pleased to set aside of the 1st Assessing Officer s order and directed the AO to carry out proper examination of books of account and Bank accounts of the assessee as well the investors and to examine the source of share application, identity of the in ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... in conditions needs to be satisfied before exercising revisional jurisdiction u/s 263 of the Act by the Commissioner of Income Tax ( in short, CIT ). The twin conditions are that the order of the Assessing Officer must be erroneous and so far as prejudicial to the interest of the Revenue. In the following circumstances, the order of the AO can be held to be erroneous order, that is (i) if the Assessing Officer's order was passed on incorrect assumption of fact; or (ii) incorrect application of law; or (iii)Assessing Officer's order is in violation of the principle of natural justice; or (iv) if the order is passed by the Assessing Officer without application of mind; (v) if the AO has not investigated 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. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ient opportunity of being heard to the assessee in order to meet natural justice, equity and fairness. (emphasis given by us) 13. Pursuant to the aforesaid direction of the Ld. First PCIT, the Second AO has framed the reassessment/2nd assessment order by accepting the returned income of assessee by order dated 19.08.2016. 14. Thereafter the 2nd Ld. PCIT again exercised his revisional jurisdiction and was pleased to set aside by order dated 11.03.2019 the reassessment/2nd reassessment order of the AO dated 19.08.2016 and directed fresh assessment (which means a 3rd assessment to be framed). 15. The aforesaid action of the 2nd Ld. PCIT dated 11.03.2019 is challenged before us. According to the Ld. Counsel Shri Soumitra Chowdhury, the Ld. PCIT erred in assuming his jurisdiction without satisfying the jurisdictional condition precedence as prescribed u/s 263 of the Act and therefore the action of the Ld. PCIT 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/reassessment order passed by the 2nd AO u/s 143(3)/263 of the Act dated 19.08.2016, the 2nd Ld. PCIT has all ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ssessment 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. Further, The First Ld. Pr. CIT found fault with the AO s order for not giving any credence to the fact that pursuant to issuance of notice u/s. 133(6) of the Act by him the share subscribers had filed all documents requisitioned by him and the AO did not record the same in the order-sheet. The Ld. Pr. CIT found fault with the AO s order in not discussing the basis of evidence on which adverse inference was drawn against the assessee. Moreover, the First Ld. Pr. CIT found fault with the AO for not bothering to examine the contention of the assessee or to bring on record anything against the assessee and according to him, the AO has simply jumped to the conclusion and treated the share capital as unexplained cash credit. The First Ld. Pr. CIT found fault with the action of AO for not bothering to issue show cause notice regarding points of addition to be made. Therefore, according to the First Ld. Pr. CIT the first original assessment order framed u/s. 143(3) dated 16-03-2015 was against the principle of natural ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e second AO has acknowledged in his reassessment order that he has examined the details furnished before him. And that he has verified the identity, creditworthiness genuinety of share subscribers as well as the source of fund. And he has recorded in his re-assessment/second assessment order that ShriVinay Kumar Singh, A.R of the assessee company appeared and produced the books of account and bank statement of the assessee company which he has examined. 20. The AO also acknowledges in his re-assessment / second assessment order that he has examined the books of account bank statement of assessee as well as that investor (share subscribing seven (7) companies) (refer page 40-189 of PB). And having conducted enquires as per the direction of the Ld. Pr.CIT-4, Kolkata (First Ld. Pr. CIT) in his order passed u/s. 263 of the Act dated 03.06-2016 (First Revisional Order) thereafter, the second AO by order dated 19.08.2016 accepted the return filed by the assessee and 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. T ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 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 offered by such assessee company shall be deemed to be not satisfactory, unless- (a) The person, being a resident in whose name such credit is recorded in the books 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]. 23. 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 AY 2012-13. 24. Next let us refer to the definition of income stated ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 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 assessee is duty bound to explain the nature and source of the credit entry in the books and if the assessee fails to explain or if the AO is not satisfied, he may charge to income tax the sum so credited. 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 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 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ding on the basis that the addition of the proviso to Section 68 of the Act is immaterial and does not change the interpretation of section 68 of the Act both before and after the adding of the proviso. In any view of the matter the three essential tests while confirming the pre proviso Section 68 of the Act laid down by the Courts namely the genuineness of the transaction, identity and the capacity of the investor have all been examined by the impugned 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 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... red to explain in the books of accounts by the provisions of Sec. 68 of the Act. The assessee has successfully established the identity of the companies who have purchased shares at a premium. The assessee has also filed bank details to explain the source of the share holders and the genuineness of the transaction was also established by filing copies of share application forms and Form No. 2 filed with the Registrar of Companies. Considering all these undisputed 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 care ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... h Court in the case of Apeak Infotech-88 taxmann.com. 695 (Bombay) when the question was whether the amount received as share premium on issue of share by the respondent-assessees-companies could be taxed as profits and gains of business in the hands of the assessees under section 28(iv) of the Act . 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 Incometax (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 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 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 anyother 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 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: ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 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 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 Settlemen ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... vices (P.) Ltd. (supra) and in the apex court in G. S. Homes and Hotels (P.)Ltd. (supra).Thus not entertained. 28. 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. 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. 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 whet ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the Hon ble Gujarat High Court in the case of Dy CIT vsRohini Builders (2002) 256ITR360 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 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 ha ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... on, 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 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 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... sessee 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 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 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ow 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. 32. Further, in the case of CITv. 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 s ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 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 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 Income-tax (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 t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 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 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. 35. When a question as to the creditwort ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e 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. 37. 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 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 f ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he Act was wrong. The learned Commissioner of Income Tax (Appeals) after hearing the department and the Assessee Company deleted the addition of Rs. 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 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 Com ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... al on three questions which essentially centre around the question of whether the Appellate Commissioner erred in law in deleting the addition of Rs. 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, 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. 39. 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) ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... t 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 reassessment/ 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 03.06.2016 and the reassessment /Second assessment of the AO dated 19.08.2016, the following facts can be discerned:- (a)The First Ld. Pr. CIT has taken note in the first revisional order dated 16.03.2016 after perusal of the first assessment records/folder that during the first round of scrutiny proceeding, the assessee company 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:- (i) audited financial statements; (ii) copy of Form filed with the ROC (Form 2 5); (iii) copy of ITR of the assessee company as well as that of share subscribing company; (iv) details ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... l as the investor. The AO is also directed to examine the source of share application, identity of investor and its genuineness . (emphasis given by 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 16-03-2015. 43. 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 comp ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... after, the second AO has clearly stated that he has verified the documents and verified the documents submitted by them to prove their respective identity, creditworthiness genuineness of the share capital premium. Thus where we look at the aforesaid facts it is discerned that all the seven (7) share applicants pursuant to statutory notices have filed their respective (i) PAN details, (ii) CIN detail, (iii) Audited Annual Report for FY 2011-12 (AY 2012-13), (iv) ITR acknowledgment for AY 2012-13 and thus we note that the identity of the investors were duly furnished by them; and the second AO has acknowledged to have verified the same; 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 since all the share subscribing parties filed all the documents called for by the AO (PBPage 04 to 1 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 2,50,000.00 3 Kalyankari Wholeseller Pvt. Ltd 112 12,46,91,721 121 1,95,00,000 4 Amritrashi Shoppers Pvt. Ltd 128 9,16,91,577 141 1,45,00,000 5 Highview Construction Pvt. Ltd 150 9,51,96,720 160 2,02,00,000 6 Kamalant Suppliers Pvt.Ltd 172 5,02,96,721 180 2,00,00,000 7 Ranbhumi Wholeseller Pvt.Ltd 55 7,97,00,000 66 2,50,00,000 Total 9,97,00,000.00 47. So, from a perusal of the above chart, we note from the documents referred supra (page 40 to 189 PB) that the assessee and the shareholders have brought to the notice of Second AO that they (share subscribers) have enough net ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 7 1st Assessment Order in this case was found erroneous and prejudicial to interest of revenue by PCIT-4, Kolkata. Hence PCIT-4 vide his order u/s 263 dtd, 03.6.2016 directed AO to conduct sufficient amount of enquiries and finalize the order accordingly. Intention of said order u/s. 263 of the Act was to strengthen the assessment order passed dtd. 16.3.2015, as because of possible paucity of time AO could not conduct all the required enquiries. But subsequent order passed by AO u/s 143(3) was made without conducting proper enquiries of transactions and creditworthiness of investors AO ought to have. Any order passed subsequent to order u/s 263 must be in favor of revenue. Either earlier assessed income should be enhanced or should be same as earlier order but with enhanced enquiries so that addition should be strengthen to pass the test of appellate proceedings. But here the assessment order passed u/s. 143(3) r.w.s 263 was erroneous as addition made u/s. 68 on account of unexplained share capital/premium was not added back. From a perusal of the aforesaid observation of the second Ld. PCIT it is clear that he nursed certain notion like (i) intention of order u/s. 263 was t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ise 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 order of the AO in respect of share capital and premium collected by the assessee as erroneous as well as prejudicial to the interest of the revenue. In the light of the aforesaid discussions and on perusal of the documents, we are of the view that AO s view to accept the identity, creditworthiness and genuineness of the share capital and premium collected from the share subscribers was a plausible view and at any rate cannot be termed as an unsustainable view on law or facts 49. Further, we also take note that while he proposed to interfere u/s. 263 of the Act, he had opined that there was no detailed or independent enquiry but finally concluded that there was lack of enquiry or proper enquiry. So, the Ld. Second Pr. CIT accepts that there was enquiry made by the second AO, however, he concludes that there was lack of enquiry. So when there was an enquiry conducted by AO, then the AO has discharged the duty of an investigator. And we note that all the documents referred to above are avai ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... finding of Second Pr. CIT that the Second AO has not conducted enquiry is incorrect and is flowing from suspicion only. We note that the assessee has discharged its onus, as required by the law in force in this AY 2012-13, then if the Ld. Pr. CIT was not satisfied with the enquiry conducted by second AO, then he ought to have called for whatever additional documents/materials or issued summons or issued notices and collected those facts which according to Second Ld. Pr. CIT, the AO omitted to collect and then demonstrated that those actions/documents which he collected in that process gave result to a different finding of fact which will turn upside down the claim of the assessee and thus able to show that the actions/omission of AO in conducting the investigation was erroneous, which unfortunately is not the case before us. And equally bad is the bald allegation/fault that second AO has not collected total facts cannot be accepted being vague and based on conjectures and surmises and so meritless. Since the assessee company has discharged its onus as discussed supra, and still if the Second Pr. CIT had to find the order of Second AO erroneous for lack of enquiry or for not collec ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ment order passed by the AO is erroneous in so far as it is prejudicial to the interest of the Revenue in accordance with Explanation 2(c) to section 263(1) of the Act.[ For ready reference it is reproduced.] Explanation 2 under section 263 of the Act reads as under:- For the purpose of this section, it is hereby declared that an order passed by the Assessing Officer shall be deemed to be erroneous in so far as it is prejudicial to the interests of the revenue, if in the opinion of the Principal Commissioner or Commissioner,- (a) . (b) .. (c)the order has not been made in accordance with any order, direction or instruction issued by the Board under section 119; or 52. However, we note that the Ld. CIT(A) has made a bald statement that the AO s assessment order attracts Explanation 2(c) u/s. 263 of the Act. However, he failed to spell out in his impugned order how the action of AO while framing the assessment order is not in accordance to any order, direction or instruction issued by the Board under section 119 of the Act. So, the deeming fiction as envisaged in Explanation (2) u/s. 263 of the Act cannot be used to interfere with the order of AO. This action of Ld. P ..... X X X X Extracts X X X X X X X X Extracts X X X X
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