TMI Blog2023 (6) TMI 725X X X X Extracts X X X X X X X X Extracts X X X X ..... rom the director. Assessee company has duly explained the sources of fund in the hand of Shri Ramesh Vardhan. The revenue authority also accepted the partial amount but not accepted source of the other amount only based on surmises and conjecture. Thus, we hold that the assessee has discharged the onus cast u/s 68 of the Act with respect to receipt of share application money from Shri Ramesh Vardhan. Decided in favour of assessee. - ITA No. 327/AHD/2022 - - - Dated:- 14-6-2023 - Shri Waseem Ahmed, Accountant Member And Shri Siddhartha Nautiyal, Judicial Member For the Assessee : Shri Sanjay Devadiya And Shri Sandip Kothari, A.Rs For the Revenue : Shri Ramesh Kumar, Sr.D.R ORDER PER WASEEM AHMED, ACCOUNTANT MEMBER: The captioned appeal has been filed at the instance of the Assessee against the order of the Learned DRP-2, dated 30/05/2022 Mumbai, arising in the matter of assessment order passed under s. 143(3) r.w.s. 144C(13) of the Income Tax Act, 1961 (here-in-after referred to as the Act ) relevant to the Assessment Year 2018-2019. 2. The assessee has raised the following grounds of appeal: 1. The Learned ACIT has erred in law and on fact o ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 8 of the Act. 3.3 In view of the above, the AO made draft assessment under section 144C of the Act wherein he made addition of Rs. 1,23,39,500/- under section 68 of the Act and addition of Rs. 1,05,96,120/- being TP adjustment as per the order of the TPO. 4. Against the draft assessment order, the assessee filed objection before the learned DRP and made the following submission. a) Regarding addition under section 68 of the Act The assessee before the learned DRP submitted that Shri Ramesh Vardhan is an existing shares holder to whom fresh shares were issue during the year under consideration. Shir Ramesh Vradhan is high income individual declaring average annual income for last 4 years over Rs. 64 Lakh and in the year under consideration declared income of Rs. 1,01,08,046/- only. Shri Remesh Vardhan made investment in the shares out of the fund from opening bank balance, salary income, redemption of mutual fund and temporary loan from friends and relative. The amount of share application money was received through banking channel which can be verified from the bank account of the company and corresponding entry in the bank account of Shri Ramesh Vardhan. The assess ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... esh varadan (Rs. 24,67,900/- as share capital and Rs. 98,71,600/- as share premium) towards the allotment of 24,679 equity shares cannot be trated as unexplained. Therefore, keeping in view the facts and circumstances of the case, as discussed in earlier part of this order, it is our view in that the brought forward balance of Rs. 10,43,192.53 and Rs. 2,28,407.21 as on 01.04.2017, as appearing in the bank statements of the assessee with ICICI Bank can be considered as explained for the purpose of investment in equity shares issued to Sh Ramesh vardan. 5.3.17 further, the amount credited to the bank account of Sh Ramesh Varadan towards Commission income of Rs. 5,96,166/- and salary received from the for the purpose of investment in equity shares issued. 07/04/2017 291,667 06/05/2017 299,667 17/06/2017 2,99,637 10/07/2017 2,99,673 05/08/2017 2,99,890 04/09/2017 2,99,890 11/10/2017 2,99, ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... relation with the lender Amount Date of receipt 12 Bharat Shashikant Makwana (Friend) 13,00,000 23.01.2018 14 Sudh Satyaprakash Tiwari, (Friend), Proprietor Anshika Industries 5,00,000 01.02.2018 19 Anita Ramesh Vardan (Wife) 3,00,000 19.03.2018 20 -Do- 8,00,000 21.03.2018 21 Hiren Kumar Vithaldas Shah(Friend) 3,00,000 29.03.2018 The assessee has even failed to prove the identity of Smt. Sudha Satyaprakash Tiwari. Under these circumstances no credit can be allowed to Sh Ramesh Varadan on account of loans taken from his friends and relatives, for the purpose of investment in equity shares issued by the assessee. 5.5.21 The AO is directed to recompute the addition made u/s. 68 of the Act in view of our findings given in the preceding p ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... sessing Officer is enjoined to work out the arm's length price as per sub-sections (1) and (2) of section 92 following the method outlined in section 92C. If he considers necessary or expedient so to do, he may with the previous approval of the Commissioner, refer the computation of arm's length price in relation to the transaction to the Transfer Pricing Officer under section 92CA The Transfer Pricing Officer has to determine the arm's length price after notice to the assessee. On the basis of such determination the Assessing Officer has to compute the total income of the assessec. It is only if the Assessing Officer comes to the conclusion that the interest of the revenue would be better served by not applying sub-sections (1) and (2) than by adhering to them, sub-section (3) would be attracted and the Assessing Officer will have to proceed with the assessment without giving effect to sub- sections (1) and (2). Without complying with the statutory requirements it will be too presumptuous to assume the said transaction is beneficial for the Revenue and then invoke sub-section (3) of section 92. 6.3.10 In view of the aforesaid we do not find any infirmity in the re ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... atter of the assessment as the case was selected for limited scrutiny. Regarding the addition under section 68 of the Act, the ld. AR contended that the assessee has discharged the onus cast under section 68 of the Act by furnishing the identity and creditworthiness of the parties. 8. On the other hand, the learned DR vehemently supported the order of the authorities below. 9. We have heard the rival contentions of both the parties and perused the relevant materials available on record before us. Admittedly, the case of the assessee was selected under Limited Scrutiny scheme. Before going into the fact of the case on hand, we note the CBDT in instruction No. 20/2015 dated 29/12/2015 has laid down that the Assessing Officer in case of Limited Scrutiny can only examine those issues for which the case has been selected or the issue mentioned therein. If the AO notice that there is a potential escapement of income which exceeds Rs. 5 Lacs, he may convert the Limited Scrutiny into Complete Scrutiny with previous approval of PCIT in writing. The relevant portion of the instruction stands as under: 3. As far as the returns selected for scrutiny through CASS-2015 are conc ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... amined and in partial modification to Para 3(d) of the earlier order dated 29.12.2015, Board hereby lays down that while proposing to take up 'Complete Scrutiny' in a case which was originally earmarked for 'Limited Scrutiny', the Assessing Officer ('AO') shall be required to form a reasonable view that there is possibility of under assessment of income if the case is not examined under 'Complete Scrutiny'. In this regard, the monetary limits and requirement of administrative approval from Pr. CIT/CIT/Pr. DIT/DIT, as prescribed in Para 3(d) of earlier Instruction dated 29.12.2015, shall continue to remain applicable. 3. Further, while forming the reasonable view, the Assessing Officer would ensure that: a. there exists credible material or information available on record for forming such view; b. this reasonable view should not be based on mere suspicion, conjecture or unreliable source; and c. there must be a direct nexus between the available material and formation of such view. 4. It is further clarified that in cases under 'Limited Scrutiny', the scrutiny assessment proceedings would initially be confined only to ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... expanding the scope of Limited Scrutiny to the regular assessment but he failed to do so. In holding so, we draw support and guidance from the order of the Hon ble Chandigarh Tribunal in case of Rajesh Jain vs. ITO reported in 162 taxman 212 where it was held as under: The jurisdiction of the Assessing Officer in such cases where the notices are issued for limited scrutiny is confined to the claims he has set out in the notice for verification. This position of law was further elaborated by the CBDT in its Circular No. 8/2002, dated 27-8-2002. The CBDT Circular clarifies that the Assessing Officer does not have the powers to make the entire assessment of income in limited scrutiny cases. Now question had to be decided when the Assessing Officer does not have the powers while making limited scrutiny assessment to decide such issues which are not covered by the limited scrutiny notice, the Commissioner (Appeals) on appeal against limited scrutiny assessment can exercise the powers in excess of the power vested with the Assessing Officer. There is no doubt that the power of the Commissioner (Appeals) is co-terminus with the power of the Assessing Officer. So, however, in the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... tion 68 of the Act by the Hon ble Calcutta High Court in the case of CIT Vs. Precision finance (p) Ltd reported in 208 ITR 465 wherein it was held as under: It was for the assessee to prove the identity of the creditors, their creditworthiness and the genuineness of the transactions. On the facts of this case, the Tribunal did not take into account all these ingredients which had to be satisfied by the assessee. Mere furnishing of the particulars was not enough. The enquiry of the ITO revealed that either the assessee was not traceable or there was no such file and, accordingly, the first ingredient as to the identity of the creditors had not been established. If the identity of the creditors had not been established, consequently, the question of establishment of the genuineness of the transactions or the creditworthiness of the creditors did not and could not arise. The Tribunal did not apply its mind to the facts of this particular case and proceeded on the footing that since the transactions were through the bank account, it was to be presumed that the transactions were genuine. It was not for the ITO to find out by making investigation from the bank accounts unless the as ..... X X X X Extracts X X X X X X X X Extracts X X X X
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