TMI Blog2022 (10) TMI 1131X X X X Extracts X X X X X X X X Extracts X X X X ..... on the ground that appraisal of the material that was available before the A.O ought to have been done in a different manner, which, thus, would have resulted to a contrary view as was advocated by him. We, thus, in terms of our aforesaid observations not being able to persuade ourselves to subscribe to the exercise of the revisional jurisdiction by the Pr. CIT set-aside the order passed by him u/s 263 of the act, dated 30.03.2018 and restore the order passed by the A.O u/s 143(3) - Appeal filed by the assessee is allowed. - ITA No. 112/RPR/2018 - - - Dated:- 17-10-2022 - Shri Ravish Sood, Judicial Member And Shri Arun Khodpia, Accountant Member For the Assessee : Shri Veekaas S. Sharma, CA For the Revenue : Shri Debashis Lahiri, CIT-DR ORDER PER RAVISH SOOD, JM: The present appeal filed by the assessee company is directed against the order passed by the Pr. Commissioner of Income-Tax, Bilaspur (for short Pr. CIT ) u/s. 263 of the Income-tax Act, 1961 (in short the Act ) dated 30.03.2018, which in turn arises from the order passed by the A.O under Sec 143(3) of the Act dated 31.03.2016 for assessment year 2013-14. The assessee has assailed the imp ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Rs. 1.65 crore during the year under consideration and had summarily accepted the same, therefore, the order passed by him u/s.143(3), dated 31.03.2016 was rendered as erroneous in so far as it was prejudicial to the interest of the revenue. Accordingly, the Pr. CIT vide his Show cause notice ( SCN ) dated 24.03.2018 called upon the assessee company to put forth an explanation as to why the order passed by the A.O u/s.143(3), dated 31.03.2016 may not be revised u/s. 263 of the Act. 4. In reply, it was submitted by the assessee that its case was selected for limited scrutiny for the solitary purpose of examining Large share application money received against unallotted shares . It was submitted by the assessee that as the A.O in the course of the assessment proceeding had carried out requisite verifications and examined the aforesaid solitary issue which had formed the very basis for selection of its case for limited scrutiny assessment and had only after finding the same in order accepted it, therefore, the order passed by him could not be revised u/s.263 of the Act. It was the claim of the assessee that as the complete details of the investor company, viz. M/s Sakshi Real Es ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ial to the interest of the revenue, it was observed by the Pr. CIT that the A.O in the course of his aforesaid examination had lost sight of the material fact that the investor company had neither during the year under consideration nor in the preceding year declared any income from operations. Also the Pr. CIT was of the view that the A.O while framing the assessment had remained oblivion of certain peculiar facts that were emanating from the financial statements of the assessee company, viz. that the capital of the investor company was a miniscule amount of Rs.15 lac; and it had substantial borrowings and investments running in crores of rupees, both of which were typical features of a shell company. The Pr. CIT was also not inclined to accept the claim of the assessee that as the investor company had been assessed u/s.143(3) of the Act, dated 22.03.2016 by the ITO, Ward-5(1), Kolkata for the assessment year 2013-14, therefore, it could not be held to be a shell company. The Pr. CIT was of the view that as the A.O had failed to carry out sufficient verifications as regards the share application money which was claimed by the assessee company to have been received from the aforesa ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... can be subscribed only at Rs. 10/- per share and not at the discounted rate of Rs. 8/- and was ready to refund the amount received as share application money. However, Sachin Verma, Director of Sakshi Real Estate Pvt. Ltd., Kolkata requested the assessee to withhold the fund till the matter was discussed in the board meeting and it is due to this dispute the share could not be allotted during the relevant financial year even after receiving the share application money. In this regard, the counsel had submitted, relevant documents as a proof of his claim which were duly examined and placed on record. He further explained that the share premium fixation is the sole discretion of the directors of the company which is based on various aspects and there is no bar by any law in such fixation. Meanwhile, letter u/s 133(6) of the Income Tax Act, 1961 dated 01/03/2016 was issued to M/s. Sakshi Estate Pvt. Ltd., Kolkata seeking certain information regarding share application money and issuance of share. In response, Shri Sachin Verma, Director of M/s. Sakshi Real Estate Pvt. Ltd. appeared and submitted the requisite documents and stated that due to issues regarding the allotment price of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ubstantiate your reply with evidences. 7. What prospects have you seen in the assessee company which prompted you to purchase share of face value of Rs.10/- at high premium. 8. Do the Directors of your company have any relation with the above company or with the directors of the company or with the any associate company of the assessee company. If so, please furnish the details. In reply, the investor company had vide its letter dated 22.02.2016 filed with the A.O documents as were called for by him u/s 133(6) of the Act, viz. copy of its income-tax return along with audited balance sheet for the year under consideration, copy of Form-20B (annual return filed with registrar of companies), company master data, names and complete address of its directors, mode of payment of the share application money (through banking channel) a/w copy of the bank account from where payments were made, confirmation of having paid share application money to the assessee company which was supported with an affidavit. Also the investor company had in its reply stated that the source of payment towards share application money was out of, viz. (i). bank balance as on 01.04.2012: Rs. 25,03,571/-; ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ness of the investor company, and the genuineness of the transaction under consideration had filed with the A.O a copy of the order that was passed by the ITO, Ward-5(1), Kolkata u/s.143(3) of the Act, dated 22.03.2016 in the case of the investor company for A.Y 2013-14. Also, the investor company had explained to the AO that the delay in allotment of the shares despite having received the share application money was on account of a dispute that had cropped up between it and the appellant company as regards the price on which the shares were to be subscribed. 10. We have given a thoughtful consideration to the facts elucidated hereinabove, and are unable to concur with the Pr. CIT, who vide his order passed u/s 263 of the Act, dated 30.03.2018 after holding the investor company, viz. M/s. Sakshi Real Estate Pvt. Ltd. as an ingenuine investor company, had observed, that as the A.O had failed to properly analyze the financial statements of the investor company and such other details which otherwise would have resulted to a contrary view, therefore, the order passed by him u/s. 143(3), dated 31.03.2016 was rendered as erroneous in so far as it was prejudicial to the interest of the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ad in fact held the order passed by the A.O as erroneous, for the reason that as per him a different view ought to have been arrived by analyzing the issue under consideration by adopting a different stream or process of verification. As the A.O had carried out necessary inquiries and verifications on the solitary issue which had formed the very basis for selection of the assessee s case for limited scrutiny assessment, i.e. large share application money received against unallotted shares, and had only after exhaustive deliberations arrived at a possible and a plausible view, therefore, it is beyond any doubt not a case of lack of enquiry which would have otherwise justified triggering of the powers vested with the Pr. CIT u/s 263 of the Act. In sum and substance the Pr. CIT could not have with a purpose and an intent to substitute his view as against that of the A.O brought into play the provisions of Sec. 263 of the Act. Our aforesaid view is supported by the landmark judgment of the Hon ble Apex Court in the case of Malabar Industrial Co. Ltd. Vs. CIT (2000) 243 ITR 83 (SC). In the aforesaid judgment it was held by the Hon ble Apex Court that where an Income-Tax Officer had adop ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nly being in nature of a tool to aid in construing of the said statutory provision, thus, can by no means be allowed to distort the set of pre-conditions which are necessarily required to be satisfied for triggering the exercise of jurisdiction therein vested. Now when, the A.O in the case before us had on the basis of his exhaustive examination, verification and deliberations on the issue in hand, i.e, authenticity of the assessee s claim of having received genuine share application money from the investor company, viz. M/s. Sakshi Real Estate Pvt. Ltd. had arrived at a possible and a plausible view, then, the same could not have been revised by the Pr. CIT under Sec. 263 of the Act, for the reason that the A.O had failed in not adopting a different line of verification and, therein, arriving at a view to the contrary on the issue under consideration. We, say so, for the reason that the A.O in the course of the assessment proceedings had not only raised queries on the issue in hand from the assessee, but had in fact in exercise of his powers u/s 133(6) of the Act called for and examined the substantial documentary evidence that was placed on his record by the investor company, viz ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ving received genuine share application money from the investor company, viz. M/s. Sakshi Real Estate Pvt. Ltd. arrived at a possible and a plausible view which the Pr. CIT could not have sought to substitute in the garb of proceedings u/s 263 of the Act. In case the claim of the department that the ld. Pr. CIT remaining well within his jurisdiction had revised the assessment order u/s 263 r.w Explanation 2 is accepted, then, we are afraid that the same would clearly militate with the mandate of Sec. 263 of the Act, and resultantly even render a reasoned assessment made after necessary examination and verification prone to revision. 13. Clause (a) of the Explanation 2 of Sec. 263 reads as under (relevant extract as was available on the statute at the relevant point of time): Explanation 2 - 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 interest of the revenue, if, in the opinion of the Principal Commissioner or Commissioner, - (a). the order is passed without making inquiries or verifications which should have been made. (b) to (d) ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the expenditure in question was revenue or capital expenditure. This argument predicates on the assessment order which apparently does not give any reasons while allowing the entire expenditure as revenue expenditure. However, that by itself would not be indicative of the fact that the Assessing Officer had not applied his mind on the issue. There are judgments galore laying down the principle that the Assessing Officer in the assessment order is not required to give detailed reason in respect of each and every item of deduction, etc. Therefore, one has to see from the record as to whether there was application of mind before allowing the expenditure in question as revenue expenditure. Learned counsel for the assessee is right in his submission that one has to keep in mind the distinction between lack of inquiry and inadequate inquiry . If there was any inquiry, even inadequate, that would not by itself, give occasion to the Commissioner to pass orders under section 263 of the Act, merely because he has different opinion in the matter. It is only in cases of lack of inquiry , that such a course of action would be open. In Gabriel India Ltd.'s case (supra), law on this aspe ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... estimate himself. The Commissioner, on perusal of the records, may be of the opinion that the estimate made by the officer concerned was on the lower side and left to the Commissioner he would have estimated the income at a figure higher than the one determined by the Income-tax Officer. That would not vest the Commissioner with power to re-examine the accounts and determine the income himself at a higher figure. It is because the Income-tax Officer has exercised the quasi-judicial power vested in him in accordance with law and arrived at conclusion and such a conclusion cannot be termed to be erroneous simply because the Commissioner does not feel satisfied with the conclusion. . . . There must be some prima facie material on record to show that tax which was lawfully exigible has not been imposed or that by the application of the relevant statute on an incorrect or incomplete interpretation a lesser tax than what was just has been imposed. ****** We may now examine the facts of the present case in the light of the powers of the Commissioner set out above. The Income-tax Officer in this case had made enquiries in regard to the nature of the expenditure incurred by the assessee. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ing the enquiry made by the AO have been recorded. For the sake of convenience, the same are extracted hereafter. 10. We have gone through the record in the light of submissions made on either side. Vide letter dated 15.11.2004 to be found at page 63 of the paper book, the ld. Ld. Assessing Officer sought information/details in respect of high ratio of refund to TDS, large share premium received and reconciliation of AIR information. Vide reply dated 25.11.2014 (page 66 of the paper book), at point No. 3 (at page 67), the assessee explained that the difference in the amount as per Form 26AS and ITR was due to the difference in the interest received from the banks duly accounted and considered in the financial statements of the company and the ITR and given that the Real Estate projects being undertaken by the company is under consideration, the interest received during construction period has been adjusted/reduced against the cost of the project. Vide page No. 118 of the paper book, the assessee submitted the bifurcation of the inventory showing that the assessee paid interest and finance charges to the tune of Rs.68,35,65,792/-, whereas the assessee received interest income on ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ew had been taken by the ITAT, Pune in the case of Nalco Company, USA City (IT TP) Vs. CIT, ITA No. 1217/Kol/2017; dated 05.02.2021. The Tribunal had observed that for triggering the Explanation 2 to Sec. 263 the existence of either of the four conditions in Clause (a) to (d) was a sine qua non. Referring to Clause (a) of Explanation 2 (with which we are concerned in the present case), it was observed by the Tribunal that as the A.O while framing the assessment had carried out a preliminary inquiry on the issue involved by seeking relevant explanation and had carried out necessary verification, therefore, on the said count itself the application of Clause (a) to Explanation 2 of Sec. 263 was ousted. 14. As in the present case before us the A.O while framing the assessment had made exhaustive examination and carried out necessary verifications on the issue which had formed the very basis for selection of the assessee s case for limited scrutiny assessment, i.e. large share application money received against unallotted shares, and had only after exhaustive deliberations arrived at a possible and a plausible view and accepted the claim of the assessee of having received gen ..... X X X X Extracts X X X X X X X X Extracts X X X X
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