TMI Blog2022 (2) TMI 1349X X X X Extracts X X X X X X X X Extracts X X X X ..... t of the revenue. Reasons provided for invoking the provisions of section 263 of the act are self-evident. Order u/s 263 of the act was passed on 19/10/2016; the AO completed the assessment order in pursuance to that order on 21/12/2016. He issues notices u/s 142 (1) on 15/11/2016. In between this that is almost within a period of one month, the summons were issued u/s 131 of the act of all the parties, notices u/s 133 (6) were also issued to the investor companies. Summons were responded to by the investors and notices u/s 133 (6) were also responded to favourably. AO takes a view that there is no addition u/s 68 could be made in the hence of the assessee with respect to the share capital and premium - Thereafter the AO held by the order passed under section 143 (3) read with section 263 read with section 144 read with section 263 read with section 147 and read with section 143 (3) of the act that the addition of ₹ 47 crores made by the learned assessing officer in the earlier order is not correct. Therefore, in this order he deleted the addition completely. With alarming speed, the assessment was completed at the direction of the learned principal Commissioner of i ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ARISHI , AM AND SHRI PAVAN KUMAR GADALE , JM For the Assessee : Shri. Prakash G. Jhunjhunwala , CA Abhishek Jhunjhunwala For the Revenue : Dr. Mahesh Akhade , CIT DR . ORDER PER PRASHANT MAHARISHI , AM : 01. This appeal is filed by Bhuvneshwari Vyapaar private limited (the appellant/assessee) for assessment year 2010 11 against the order of the principal Commissioner of income tax, Mumbai 1 (the learned PCIT) passed under section 263 of the income tax act, 1961 (the act) wherein it has been held that the order passed by the income tax officer Ward 9 (2) (1), Mumbai (the learned AO) passed under section 143 (3) read with section 263 of the income tax act dated 21/12/2016 was held to be an order which is erroneous for as prejudicial to the interest of the revenue and therefore the learned AO was directed to reframe the assessment order de novo after conducting all necessary enquiries and verification as warranted on facts of the case and also after giving due opportunity of being heard to the assessee before passing the assessment order. 02. Assessee is aggrieved with the revisionary order and therefore has raised following grounds of appeal: On ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... action and creditworthiness of the investor companies and there is nothing to disprove the assessee's submission. So, the assessment made by the AO should not have been held as erroneous and so far as prejudicial to the interest of the revenue. 11. Without prejudice to the earlier grounds the PCIT erred in law facts in stating that creditworthiness of the investor companies has not been established whereas he ignored the finding of fact that all material collected by the AO to base his satisfaction and form opinion. 03. Briefly, facts noted from the orders of the lower authorities shows that i. Original return of income was filed by the assessee for assessment year 2010 11 on 9/10/2010 at a total income of ₹ 31,898/ . ii. Subsequently, on 11/11/2011 the case of the assessee was reopened by issue of notice under section 148 of the act. On issue of notice under section 148 of the act assessee reiterated the original return filed. Subsequently the respective notices under section 143 (2) and notice under section 142 (1) of the act was issued and 16/11/2011. Thereafter the hearing took place on several dates. On 28/11/2011 the assessment order under secti ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... with section 143 (3) and read with section 147 of the act on 2 3 2015 assessing the total income of the assessee at ₹ 474,760,117/ wherein the learned assessing officer made an addition of ₹ 47.35 crores on account of share application money in the books of accounts holding that the assessee has failed to prove the identity and creditworthiness of the subscriber companies and genuineness of the transaction. The learned assessing officer further made an addition of ₹ 30,000 which was originally made on account of consultancy fees. The learned AO further made disallowance under section 14 A of ₹ 1,179,875/ . vi. Thereafter the learned Commissioner of income tax, Calcutta 4, Calcutta once again examined the record and found that the assessment order passed on 2 03 2015 is erroneous and prejudicial to the interest of the revenue for the reason that (1) the learned assessing officer issued notices under section 133 (6) to all the shareholders companies and most of the notices were answered but after known service of the notice issued to the shareholders, AO did not make any further attempt to serve those notices upon the shareholders. The notices we ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nation of books of accounts, bank accounts of the assessee as well as investor. AO is also directed to examine the source of sale application, identity of investor and its genuineness. The assessment order was directed to be made De novo. Such revisionary order (revisionary order number 2) was passed on 19/10/2016 by the Commissioner of income tax, Calcutta 4, Kolkata. ix. Consequent to that an assessment order was passed by the income tax officer, Ward 12 (2) Kolkata on 21/12/2016 determining the total income of the assessee at ₹ 524,270/-. Surprisingly in the same assessment order the learned assessing officer after carrying out detailed inquiries, verified the books of accounts, bank statements of the assessee company. The summons under section 131 of the act were issued to the directors of the investor companies as per the direction of the learned PCIT 4 Calcutta according to the revisionary order passed under section 263 of the act dated 19/10/2016. It was also mentioned that directors of the investor companies appeared, the statement were recorded under section 131 of the act along with the books of accounts and other relevant documents of the investor companies. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... y huge premium especially for keeping in view that prima facie there was no material in the balance sheet of the assessee warranting/justifying such a huge premium. iv. The AO failed to collect the relevant evidences in order to reach a logical conclusion regarding the genuineness of controlling interest. v. The AO failed to examine all the bank accounts for the entire period in the course of verification to find out the money trail of the share capital. vi. AO failed to adequately trace out the money trail to ascertain the genuineness of source of fund invested by shareholders in the assessee company vii. on the whole of the impugned order dated 21/12/2016 passed under section 263/143 (3) of the income tax act, 1961 prima facie suffers from lack of independent and adequate enquiry on the aforesaid issues. xii. Against the revisionary order number 3, the assessee preferred appeal before the coordinate bench in ITA number 2311/Kol/2019 wherein the coordinate bench held that the learned principal Commissioner of income tax issued notices on the assessee only on 19/2/2018 and 1/3/2018 and more this notices were not served on the assessee. Therefore, the learned PCIT pas ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... also Ram Pyari Devi saraogi 67 ITR 84 have held that any assessment completed without necessary enquiries is warranted on facts of the case is erroneous insofar as it is prejudicial to the interest of revenue. 3. Hence, considering the facts in totality, I am of the considered opinion that the AO in the instant case has failed to conduct all necessary enquiries as warranted on facts of the case and as discussed in this order stop hence the assessment order is erroneous insofar as it is prejudicial to the interest of revenue. Accordingly, the same is hereby set-aside stop 4. Hence, based on evidence submitted and submission made, the AO is hereby directed to examine the evidence, conduct inquiries and verify the facts of the case in the light of judgments discussed in this order super and all other related judgments dealing with identity of creditors, genuineness of transactions and creditworthiness of the creditors and complete the assessment accordingly. 04. This order passed under section 263 of the income tax act on 26/3/2022 (revisionary order number 4) is under challenge before us. 05. The learned authorized representative submitted i. Written submission made be ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... lcutta High Court of throwing amalgamation and respective notification on the website of Ministry of corporate affairs. He therefore submitted that nothing was left out to be shown to the assessing officer on several occasions. The enquiries could have possibly done by any officer was made by all the officers assessing the company. Therefore, the allegation of the learned principal Commissioner of income tax that the enquiries made by the learned assessing officer are inadequate is not correct. He further stated that on the basis of the assessment order passed by the learned that assessing officer once making the addition and another time deleting the addition, were both made at the instances of the learned principal Commissioner of income tax stated in the order under section 263 of the income tax act. Therefore, any order passed pursuance to the direction of the learned principal Commissioner of income tax cannot be held to be erroneous and prejudicial to the interest of revenue. ii. He referred to his 879 pages paper book to show that all the information with respect to the investors were submitted before the lower authorities, they were properly investigated, those parties a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... to the several summons issued by the assessing officer to the investor and as well as the replies submitted. He further referred to several notices issued under section 133 (six) issued to the various investors which have been replied. Accordingly his submission was that that the complete enquiry has been made by the learned assessing officer with respect to making the addition as well as with respect to deleting the addition and therefore now the order passed by the learned principal Commissioner of income tax which does not show that what further enquiries the assessing officer should have carried out is merely not acceptable. vi. The order cannot be said to be erroneous if the learned assessing officer adopted one of the possible views. He submitted that the assessing officer has made the addition once and did not make the addition once and therefore invoking of the provisions under section 263 of the act on both the occasions clearly shows that there are to views possible onset of the facts available. vii. It was further submitted that the order could not be revised under section 263 of the income tax if active the learned assessing officer had made reasonable enquiries. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he main section i.e. section 263 (1) of the act. The learned principal Commissioner of income tax can exercises revision of jurisdiction in the average the assessment order is erroneous, well as prejudicial to the interest of the revenue, and not otherwise. He submitted that when learned assessing officer has made the addition, twin conditions are not satisfied as one of the conditions fails, therefore, the revisionary order is not sustainable. xi. He further referred to the decision of the coordinate bench in case of Shri Doreabji Tata Trust 122 taxmann.com 274 on identical issues. xii. In the end, he submitted a 20 pages written synopsis challenging the revision orders. xiii. In the end, he submitted that ROI was filed on 09/10/2010. No Assessment u/s 143 (3) was made. First Assessment was passed on 28/11/2011 u/s 143 (3) rws 147 of The Act. In reasons recorded for reopening of assessment only issue was wrt non-taxability of income to the extent of RS 30,000/-. Ultimately, in the reassessment order dated 28/11/2011, only disallowance of Rs 40,000/- u/s 14 A of the Act and addition of RS 30,000/- of consultancy fees was made. Order us/ 263 of The Act can be passed within ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... xability of otherwise of the share premium and share capital of ₹ 45 crores was not the reason of reassessment but during the course of reassessment proceedings the learned AO touched upon that issue and therefore it became subject matter of revision before the learned CIT. The learned CIT as per order dated 11/3/2014 directed the AO to examine, identity, creditworthiness of the new shareholder and genuineness of the transaction. In pursuance of above, revisionary order (first order) the AO passed an assessment order dated 2/3/2015 and the total income was determined at ₹ 474,760,170. In that assessment order the share capital was added under section 68 of ₹ 47,35,50,000/ . Therefore, in the assessment order dated 2/3/2015 the complete addition was made by the learned assessing officer after making the complete enquiry, rejecting all submissions of the assessee. In the assessment proceedings, the AO considered the modus operandi of the accommodation entry providers, summonses were issued under section 131 to the directors of the shareholder company of the assessee, none of them appeared. The assessee was informed about that and asked to produce them. The show c ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... onourable finance Minister on the need for furthering and nonadversarial tax regime which cannot be achieved without concentrated and never at all levels, especially at the level where public interaction is high. On these grounds, the order passed by the learned assessing officer which is made an addition of ₹ 47 crores was held to be erroneous and prejudicial to the interest of the revenue. The learned principal Commissioner of income tax in that order has given a clear-cut direction to the assessing officer that the assessment proceedings must be initiated at the earliest and to be completed without waiting time barring date. AO must provide sufficient opportunity of being heard to the assessee in order to meet natural justice, equity and fairness. At this stage, it is very important to note that assessment where the addition of ₹ 47 crores was made was passed on 2/3/2015. This order has not been challenged by the assessee before CIT A. Despite this addition, the learned principal Commissioner of income tax revised the order passed by the AO holding that it is erroneous and prejudicial to the interest of the revenue. Reasons provided for invoking the provisions of s ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... fferent occasions have made the whole issue debatable and having two views even after making the detailed enquiry. 013. On all these orders of revision, all the inquiries were made by the learned assessing officer when assessment order pursuant to the first revision was made on//3/2015 wherein the addition of ₹ 47 crores was made. Therefore, none of the revisionary order states that what is the further enquiry that AO should have made after making the addition. Therefore, the invocation of explanation (2) to section 263 of the act is not proper. It can only be invoked where the order is passed without making enquiries and verification, which should have been made by the learned assessing officer. At the whims and fancies of the principal Commissioner of income tax provisions of explanation (2) (a) of section 263 cannot be invoked. In this case there is no reference that what are the further enquiries which would have been made what are the further verification which should have been made by the learned assessing officer even after making the addition of ₹ 47 crores. 014. In Principal Commissioner of Income tax, Surat-2 V Shreeji Prints (P.) Ltd.* [2021] 130 taxman ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of ₹ 47 crores to make further verification and after further verification the AO deleted it. Therefore, it is not the case where there are two judicial views available; it is the case wherein two administrative and quasi-judicial orders under section 263 are available which are taking exactly opposite view. In such circumstances, the order under section 263 challenge before us is not sustainable. The honourable Supreme Court in 243 ITR 83 Malabar industrial Co Ltd versus CIT has categorically held that the phrase 'prejudicial to the interest of revenue' has to be read in conjunction with the erroneous order passed by the assessing officer. Every loss of revenue as a consequence of an order of the assessing officer cannot be treated as prejudicial to the interest of revenue, for example, when ITR adopts one of the courses permissible in law and it has resulted in loss of revenue, or to views possible and the ITO has taken one view which the Commissioner does not agree, it cannot be treated as an erroneous order prejudicial to the interest of the revenue, unless the view taken by the ITO is unsustainable in law. In the present case, the AO has taken a view once a makin ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... certain other items not involved in the reassessment proceeding. These items did not form the basis of reassessment proceeding. The jurisdiction of the Commissioner to invoke his revisional power was questioned on the ground of limitation, as provided for in sub-section (2) of Section 263 of the 1961 Act. In the factual context of that case, the Commissioner's power to exercise his revisional jurisdiction could be retained if the date of reassessment was treated to be the starting point for computing the period of limitation. But such revisional power became incapable of being exercised because of limitation provisions if the date of initial assessment under Section 143(3) of the Act was taken to be the starting point. The Supreme Court's opinion in that case was that if revisional power was sought to be exercised in relation to items which did not form the basis of reassessment proceeding, then the Commissioner's jurisdiction could not be exercised because of the limitation provision contained in Section 263(2) of the 1961 Act. 9. The ratio of these two authorities does not apply in the facts of the case out of which this appeal arises. It is apparent from the re ..... X X X X Extracts X X X X X X X X Extracts X X X X
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