TMI Blog2022 (10) TMI 817X X X X Extracts X X X X X X X X Extracts X X X X ..... old that in present case the revision under S.263 of the Act is not permissible. Appeal filed by the Assessee is allowed. - I.T.A. No. 83/Rjt/2021 - - - Dated:- 7-7-2022 - SHRI PRAMOD M. JAGTAP, VICE PRESIDENT AND SHRI MAHAVIR PRASAD, JUDICIAL MEMEBR Appellant by: Shri Dhinal Shah, A.R. Respondent by: Shri Ajai Pratap Singh, CIT. DR ORDER PER MAHAVIR PRASAD, JM: The appeal has been preferred by the assessee against the order of the Principal Commissioner of Income Tax, Rajkot-1 ( PCIT in short) vide Appeal No. ITBA/REV/F/REV5/2020-21/1031636529(1) dated 21.03.2021 arising in the assessment order dated 21.12.2018 passed by the Assessing Officer (AO) under s. 143(3) of the Income Tax Act, 1961 (the Act) concerning AY. 2016-17. 2. The grounds of appeal raised by assessee read as under: 1. The order u/s. 263 of the Act is bad in law. 2. The learned Pr. CIT has erred in law as well as on facts in not considering the submissions of the appellant on the strength of which the assessment order was neither erroneous nor prejudicial to the interest of revenue and therefore, the provisions of Section 263 of the Act were not applicable to the cas ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... xit options. Further, looking to the income declared by the assessee company, it can be stated that no reasonable return on such investment by way of dividend is visible in these cases. In such scenario, no prudent investor would like to stack such huge amount of money, that to borrowed, in shares of the assessee company where no return on investment appeared forthcoming. Further, perusal of the submissions made by the assessee during the course of assessment proceedings, it was seen that none of the documents so provided were verified or signed by the respective share-holder/ depositor. It was also observed that as per the Audit report, the assessee has raised share capital amounting to Rs. 15.39 crores whereas as per the submissions of the assessee, the same was to the tune of Rs. 14.94 crores. It was further observed that the assessee had submitted balance-sheet in respect of some of the share-holders/depositors. On perusal of such balance-sheet, it was seen that these persons have availed huge loans, sometimes 7-14 times of their own capital, and had invested such borrowed money in the assessee company in the form of share capital or deposits/loan. Again, it appeared weird on t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... is enclosed as Annexure. 4.3 On perusal of the details uploaded, it is noted that some shareholders loan providers claimed to have invested / lent amounts which are 20-35 times their annual returned income. For instance, 1). Shri Bhavesh Dhanjibhai (Sr No. 9 of the Chart), given Rs. 19.60 lakhs of unsecured loan and invested Ra. 15.40-Lac in share capital whereas his returned income AY 2016-17 is only Rs. 98,310/-; 2) Shri Raviklumar Jayntibhai Bhorania (Sr. No. 22 of the Chart), given Ra. 14 Lacs of unsecured loan and invested Rs. 15.40 lacs in share capital whereas his returned income of AY 2016-17 is only Rs. 1,73,710/- and 3) Smt. Kalpnaben Sanjaybhai Patel (Sr. No. 30 of the Chart), invested Rs. 72.30 lacs in share capital whereas her returned income of AY 2016-17 is only Rs. 2,21,840/-. Further, it is found that Smt. Kalpaben is showing tailoring work as source of her income. It is perplexing to note that a lady with only income returned of R.s 2.2 Lacs made huge share capital investment of Rs. 72.30 lacs (i.e. 33 times the income). Similar is the case with other female members, who have invested in the capital of the company. Moreover, the bank statements provided reveale ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... n and Rs. 15.40 of Share Capital) during the year. Onm perusal of his Balance Sheet to trace the source of these investment it is seen thathe has reposrted Rs. 3.17 Lacs of own fund (i.E. capital), Rs. 44.88 Lacs of borrowed fund (i.e. Unsecured Loans) 2) Shri Vipulbhai Shamjibhai (Sr. No. 28 of the Chart) has invested total Rs. 75.40 Lac (Rs 60 Lac of loan Rs. 15.40 of share Capital during the year. On perusal of his Balance Sheeet to trace the source of these investments it is seen that he has reported Rs. 9.90 Lacs of own fund (i.e. capital), Rs. 76 Lacs of borrowed fund (i.e. Unsecured Loans). It is quite unusual that a person is borrowing money which is 7-14 times of his own capital and utilized this money invest in shares on which no return are received for year together. These glaring discrepancies should have raised the antenna of the AO and he should have conducted necessary enquiries / verification. However, the AO accepted the share capital investment and loans without verification / inquiries that should have been made. 4.6 Thereafter, in response to the abovesaid notice, the assessee replied that out of total share capitals, the amount of Rs.3,16,62,000/- pertains t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... High Court in case of Five Vision Promoters Pvt Ltd. - 380 ITR 289, Ahmedabad ITAT in case of Praful (Agarwal) Art Prints Pvt Ltd. ITA No. 3568/Ahm/2007, Ahmedabad ITAT in case of Siyed Paper Mills Ltd. - ITA No. 1544-1545/Ahm/2007, Agra ITAT in case of M/s. Garg Preservation Pvt. Ltd- ITA No. 79/Agra/2012, 4.7 The assessee further contended that the order passed by the AO was not erroneous and therefore, the revision under section 263 was not permissible as held by Hon'ble Supreme Court in case of Malabar Industrial Co. (243 ITR 83). As regards proviso to section 68, the assessee contended that when no addition can be made u/s. 68, point of no or insufficient inquiry made by the A.O. with reference to proviso to section 68 also becomes academic and redundant as far as the assessment of the assessee company is concerned. The assessee also contended that even if the Revenue disagreed with the legal view expressed in aforesaid judgments, it will be a case of two possible legal views in which case also the revision u/s. 263 was not permissible in view of Supreme Court judgment in case of Max India Ltd.(295 ITR 282) wherein the SC held that revision u/s. 2 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... computation of income ix. Copy of PAN were submitted. We have noticed that Company was formed in 2013 for vitrified files and stated commercial production in 2016. The co-ordinate bench in case of Hitendra A. Nanavati vs. CIT (2012) 20 taxmann.com 248 (Ahmedabad), it has been held that where learned AO was satisfied with explanation of assessee, a change of opinion or view would not enable CIT to exercise jurisdiction under S.263 of the Act. 4.4 While adjudicating a similar issue, Hon'ble Supreme Court in the case of CIT v. Max India Ltd. (supra) relying upon its earlier decision in the case of Malabar Industrial Co. Ltd. (supra) held as under: The phrase 'prejudicial to the interests of the Revenue' in s. 263 of the IT Act, 1961, has to be read in conjunction with the expression 'erroneous' order passed by the AO. Every loss of revenue as a consequence of an order of the AO cannot be treated as prejudicial to the interests of the Revenue. For example, when the AO adopts one of two courses permissible in law and it has resulted in loss of revenue, or where two views are possible and the AO has taken one view with which the CIT does not agree, it c ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... clusion. The CIT did not agree with the conclusion reached by the ITO. Sec. 263 of the Act does not empower him to take action on these facts to arrive at the conclusion that the order passed by the ITO is erroneous and prejudicial to the interests of the Revenue. Since the material was there on record and the said material was considered by the ITO and a particular view was taken, the mere fact that a different view can be taken, should not be the basis for an action under s. 263 of the Act and it cannot be held to be justified. 4.8 In CTT v. Mehrotra Brothers [2004] 270 1TR 157 (MP), the Hon'ble High Court gave the stamp of approval to the order of the Tribunal which, after relying on CIT v. Ratlam Coal Ash Co. [1987] 65 CTR (MP) 305/M9881 171 ITR 141 (MP), had held that when the AO considered the records before him and completed the assessment after considering the evidence filed and after his satisfaction about the genuineness of cash credits, the order of revision under s. 263 on the vague ground that the AO did not make proper enquiry was not valid. 4.9 Hon'ble Punjab Haryana High Court in the case of CIT v. Deepak Mittal [2010] 37 DTR (P H) 8/[2010] 32 ..... X X X X Extracts X X X X X X X X Extracts X X X X
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