TMI Blog2023 (5) TMI 1298X X X X Extracts X X X X X X X X Extracts X X X X ..... ssment order cannot be said to be erroneous? - There is no dispute to the fact that an extensive inquiry has been conducted by the ld. Assessing Officer regarding the issue of share capital and share premium received by the assessee during the year and the ld. Assessing Officer has made proper application of mind and taken possible view as permissible in law which are duly backed by the documentary evidences filed by the assessee, independent inquiry conducted by the ld. Assessing Officer and settled judicial precedence, therefore, since the issue referred in the show-cause notice under section 263 of the Act has been properly examined by the ld. Assessing Officer, there remains no justification for ld. CIT to assume jurisdiction on the very same issue and, therefore, we quash the impugned revisionary proceedings carried out under section 263 of the Act and allow all the grounds of appeal raised by the assessee. - SHRI SANJAY GARG, JUDICIAL MEMBER DR. MANISH BORAD, ACCOUNTANT MEMBER For the Appellant : Shri Veekaas S. Sharma, CA, For the Respondent : Shri P.P. Barman, Addl. CIT, ORDER PER DR. MANISH BORAD, ACCOUNTANT MEMBER:- This appeal at the i ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of the IT Act 1961 and hence the order passed be quashed. (8) For that in the facts and circumstances of the case the directions contained in the order passed by the Learned Commissioner of Income Tax u/s 263 of the Income Tax Act 1961 are beyond jurisdiction and hence the same be struck down or quashed. (9) For that in the facts and circumstances of the case the order passed by the Learned Commissioner of Income Tax u/s 263 of the Income Tax Act 1961 is without any basis and hence the same be quashed. (10) The appellant craves leave to press new, additional grounds of appeal or modify, withdraw any of the above grounds at the time of hearing of the appeal. 3. Brief facts of the case as called out from the records are that the assessee is a Private Limited Company engaged in the business of trading and investment. Income of Rs.16,940/- declared in the return for A.Y. 2009-10 filed on 24.09.2009. A notice under section 148 of the Act was issued on 07.12.2010 and duly served upon the assessee and reopening proceedings were carried out under section 147 of the Act. The reasons for reopening was on account of preliminary expenses written off under section 35D of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... d and he discussed about the common practice of introducing unaccounted money by way of share capital of dummying companies, huge premium received in new formed companies and thus observed that unaccounted monies claimed as share capital by creating a fa ade of paper work rotating the money through several banking channels. Thus the ld. CIT held the assessment order dated 15.02.2011 as erroneous and prejudicial to the interest of revenue observing as follows:- I have considered the facts of the case and the decisions of the superior Courts cited above. I am of the opinion that the A.O. by not pursuing the inquiries to their logical end has made the order erroneous and prejudicial to the interest of revenue. The order is, therefore, set aside and the A.O. is directed to carry out through detailed enquiries in the case. He should carry out inquiries about the various layers through which the share capital has been rotated. The A.O. is also directed to summon the present past Directors of the assessee company and the subscriber companies and examine them. The A.O. should also examine as to when this company was sold. At that point of time the fictitious assets such as shares ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... vidences. Thus since the detailed inquiry has been conducted by the ld. Assessing Officer in the reassessment proceedings on the issue which has been referred to by the ld. CIT in the impugned order and since the ld. Assessing Officer has taken a permissible view in law, therefore, ld. CIT erred in assuming jurisdiction under section 263 of the Act. The assessee placed reliance on plethora of judgments and the same are referred below:- S.No. Title CITATION AUTHORITY Following Page No. of LPP Argument:- Mandatory to issue notice u/s 143(2) 1. CBDT Circular No.549 dated 31.10.1989 -- 1 2. PCIT vs. Oberoi Hotels (P) Ltd. (2018) 409 ITR 132 (Cal). The Hon ble High Court of Calcutta 2 6 3. PCIT vs. Akzo Noble India Ltd. (2018) 2 NYPCTR 708 (Cal) The Hon ble High Court of Calcutta 7 4. ACIT ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... The Hon ble ITAT, Chandigarh 91 101 16. Supersonic Technologies (P) Ltd. Vs. PCIT (2019) 175 DTR 30 Hon ble ITAT, Delhi Bench 102 121 17. Pioneer Distilleries Limited Vs. PCIT-1, Aurangabad ITA No. 479/PUN/2017 The Hon ble ITAT, Pune Bench 122 129 Argument:- No addition u/s 68 if identity of subscribers has been furnished. 18. CIT vs Lovely Exports (P) Ltd (2008) 216 CTR 195 The Hon ble Supreme Court 130 Argument:- Jurisdiction u/s 263 cannot be assumed in case of inadequate enquiry: 19. PCIT vs. Singhal Enterprises (P) Ltd. (2022) 6 NYPCTR 973 (Cal) The Hon ble High Court of Calcutta 131 134 20. PCIT Vs. SPML Infra Ltd. (2022) 6 NYPCTR 1314 (Cal) The Hon ble High Court of Calcutta 135 138 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 236 250 30. Suresh Chand Gautam vs. State of Uttar Pradesh Writ Petition (Civil) No. 690 of 2015 The Hon ble Supreme court of India 251 299 Argument:- No addition based on perception of culpability 31. PCIT vs. Himachal Fibers Limited (2018) 98 taxmann.com 173 The Hon ble Supreme Court of India 300 301 32. PCIT vs. Himachal Fibers Limited (2018) 98 taxmann.com 172 The Hon ble High Court of Delhi 302 Argument:- No addition merely by reference to notorious practice:- 33. Lalchand Bhagat Ambica Ram vs. CIT (1959) 37 ITR 288 The Hon ble Supreme Court of India 303-318 34. CIT vs. Discovery Estates P. Ltd TS-63-HC-2013(Del) The Hon ble High Court of Delhi 319 327 Argument:- No addition merely by referri ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... PCIT Vs. M/s Chain House International Pvt. Ltd., (2018) 408 ITR 561 (MP) The Hon ble High Court of Madhya Pradesh 434 460 46. PCIT Vs. M/s Chain House International Pvt. Ltd., (2019) 2 SLPCTO 60 (2019) 262 Taxman 207 The Hon ble Supreme Court 461 Argument:- Jurisdiction u/s 263 can be assumed based on material on record only: 47. CIT vs. Gabriel India Limited (1993) 71 Taxman 585 The Hon ble Bombay High Court 462 467 10. On the other hand, ld. Departmental Representative vehemently argued supporting the finding of ld. CIT. Ld. D.R. and also submitted that most of the alleged share subscribers are paper/jama kharchi companies having poor financials, and no regular business activity and prima facie seems to be accommodation entry providing companies, wherein funds are rotated through a chain of companies and the same has not been examined by the ld. Assessing Officer with respect to the provisions of section 68 of the Act. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the PB filed on 24.6.2022. (c) Letter dated 03.03.20 filed before the Learned A.O on 04.03.'20 - copy placed on Page No.26 of the PB filed on 24.6.2022, (d) Letter dated 01.03.2022 filed before the Learned A.O on 09.03.2022- copy placed on Page No.31 to 33 of the PB filed on 24.06.2022. 13. The Learned AO provided the certified copies of all the documents lying in the assessment record. Copy of all the documents received from the Learned AO are placed on Page No.34 to 414 of the PB filed on 24.06.2022. Copy of Notice u/s 143(2) not provided to the assessee despite specific request. No whisper about issuance of notice u/s 143(2) in the Order Sheet copy whereof is placed on Page No. 76 to 78 of the PB filed on 24.06.2022. Thus, it is inferred that no notice u/s 143(2) was served on the assessee before completing the assessment. Even ld. D.R. failed to rebut this contention and could not file any proof about issuing and serving notice under section 143(2) of the Act. So far as legal position is concerned holding that it is mandatory to issue notice u/s. 143(2) of the Act before carrying out the assessment proceedings. Reliance placed on following decisions:- ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... is bad-in- law and non est then the Learned CIT cannot assume jurisdiction over such assessment order, which does not exist in the eyes of law:- S.No. TITLE CITATION AUTHORITY Following Page No. of LPB 1 Keshab Narayan Banerjee vs. CIT (1998)66 CCH 0874 Hon ble High Court of Calcutta 50-57 2 Concord Infra Projects Pvt. Ltd. vs. PCIT (2021)63 CCH 0117 Hon ble ITAT, Kolkata Bench 58-68 3 Classic Flour and Food Processing vs. ITO, Wd- 11(4), Kolkata, 764 to 766/Kol/2014 dated 05.04.2017. Hon ble ITAT, Kolkata Bench 69-80 4 M/sCharam Vincom Pvt. Ltd. vs I.T.O.,Ward-3(l), Kolkata 758/Kol/2019 dated 01.01.2020 Hon ble ITAT, Kolkata Bench 81-85 5 Minimax Commerce (P.) Ltd.vs. ACIT, Raipur ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ed on or before or after the 1st day of June, 1988 by the Assessing Officer shall include- (i) an order of assessment made by the Assistant Commissioner or Deputy Commissioner or the Income-tax Officer on the basis of the directions issued by the Joint Commissioner under section 144A; (ii) an order made by the Joint Commissioner in exercise of the powers or in the performance of the functions of an Assessing Officer conferred on, or assigned to, him under the orders or directions issued by the Board or by the Chief Commissioner or Director General or Commissioner authorized by the Board in this behalf under section 120; (b) record shall include and shall be deemed always to have included all records relating to any proceeding under this Act available at the time of examination by the Commissioner; (c) where any order referred to in this sub-section and passed by the Assessing Officer had been the subject matter of any appeal filed on or before or after the 1st day of June, 1988, the powers of the Commissioner under this sub-section shall extend and shall be deemed always to have extended to such matters as had not been considered and decided in such appeal. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rect the Assessing Officer to pass a fresh order. At this stage, before considering the multifold contentions of the ld. Representatives, we deem it pertinent to take note of the fundamental tests propounded in various judgments relevant for judging the action of the CIT taken u/s 263. 19. Hon'ble Supreme Court in the case of Malabar Industrial Co. Ltd. vs. CIT (2000) 243 ITR 83 (SC)has laid down following ratio with regard to provisions of section 263 of the Act: There can be no doubt that the provision cannot be invoked to correct each and every type of mistake or error committed by the Assessing Officer; it is only when an order is erroneous that the section will be attracted. An incorrect assumption of facts or an incorrect application of law will satisfy the requirement of the order being erroneous. In the same category fall orders passed without applying the principles of natural justice or without application of mind. The phrase 'prejudicial to the interests of the revenue has to be read in conjunction with an 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 prej ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Pearl Distributors Pvt Ltd. 72,00,000/- 81 4 Tanisha Vyapaar Pvt. Ltd. 75,00,000/- 82 5 Destiny Heights Pvt. Ltd. 91,50,000/- 83 6 Ganesh Vincom Pvt. Ltd. 87,50,000/- 84 7 GoodwardVyapaar Pvt. Ltd. 65,00,000/- 85 8 Greenfield Vinimay Pvt. Ltd. 90,00,000/- 86 9 Idea Vinimay Pvt. Ltd. 65,00,000/- 87 10 Kasturi Barter Pvt. Ltd. 90,00,000/- 88 11 Reliable Heights Pvt. Ltd. 1,05,00,000 /- 89 12 PavitraTrexim Pvt. Ltd. 1,25,00,000/- 90 13 Sakar Sales Pvt. Ltd. 91,50,000/- ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ntary evidences which is evident from the notings in the order sheet which is placed on Page No. 76 to 77 of the PB filed on 24.06.2022. The books of accounts were produced on 25.01.2011 and which was cross checked with the bank account statement of the assessee and the Learned A.O duly considered the Inspector s report which is evident from order sheet entry dated 10.02.2011. Thus, the observation of Learned CIT that the assessment order was passed without application of mind is bereft of merit. 24. Further we find that the Learned PCIT has held that proper enquiry was not conducted regarding the identity and creditworthiness of shareholders, but no doubt was expressed as far as genuineness of the receipt of share capital is concerned, in other words, genuineness of the receipt of share capital has not been doubted either in the show cause notice or in the impugned order u/s 263 which is evident from Para 3 of the impugned order u/s 263. We also note that the assessee had duly furnished the name and address of all the subscriber companies. Based on the result of the enquiry conducted by the Learned A.O, it was found by the Learned A.O that all the subscriber companies are very ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ,15,00,000/- 13 Tanisha Vyapaar Pvt.Ltd. U17120GJ2005PTC120323 AACCT2326B 75,00,000/- TOTAL 11,67,50,000/- Moreover, the existence of the subscriber companies stood established from the fact that all the subscriber companies were found at their given addresses by the Inspector of Income Tax and that the notices issued u/s 133(6) were duly served on all the subscribers and the subscribers had duly responded to the notices issued u/s 133(6), thus, the identity of the subscribers stood established beyond all shadows of doubt. 25. As far as creditworthiness of the subscriber companies is concerned, the same was evident from the audited financial statements of the subscriber companies from which the Learned A.O found that all the subscriber companies had sufficient Tangible Net Worth as tabulated herein below:- Sl.No. Name of the subscriber company Amount of share capital subscribed Tangible net worth ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... tor dated 10.02.2011 and the same is reproduced below:- 27. Further we notice the following details of the share subscriber companies were filed before the ld. Assessing Officer for necessary examination:- 28. The creditworthiness of the subscribe companies was self evident from the fact that the payments were received on account of share capital through proper banking channel from all the subscriber companies. As far as genuineness of the transaction is concerned, it is self evident from the fact that all the subscriber companies to whom the notices were issued u/s 133(6) had duly confirmed the factum of investment having been made in the shares of the assessee company that too through proper banking channel. We find support from the following judicial pronouncements: 1 PCIT Vs. M/s Chain House International Pvt. Ltd., (2018) 408 ITR 561 (MP) The Hon ble High Court of Madhya Pradesh 434 - 460 2 PCIT Vs. M/s Chain House International Pvt. Ltd., (2019) 2 SLPCTO 60, (2019) 262 Taxman 207 The Hon bl ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... tion of Learned CIT inasmuch as Section 68 of the Income Tax Act as it stood before its amendment by Finance Act, 2012 w.e.f. A.Y2013-14 did not cast upon the assessee to explain the source of source of subscribers and all that Section 68 provided was that the assessee has to explain the nature and source of sum found credited in the books of accounts. Evidently, the Learned CIT has swayed by the amended provisions of Section 68 which were not at all applicable in the year under consideration which is pertaining to assessment year 2009-10 i.e. prior to A.Y 2013-14 and in this regard, reliance is placed on the decision of this Tribunal in the case of Starpoint Construction (P) Ltd. vs. PCIT reported in(2022) 94 ITR TRIB (Trib) 299 (Kol), and in the case of PCIT Vs. M/s Chain House International Pvt. Ltd., ITA Nos. 112, 111 and 110/2018, dated 07.08.2018 (2018) 408 ITR 561 (MP), against which the SLP filed by the Revenue has been dismissed by the Hon ble Supreme Court. 31. Further we find that issuance of notice under section 133(6) of the Act tantamounts to be a sufficient enquiry as held by the Hon ble Jurisdictional High Court vide the recent order dated 31.10.2022 in the case ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 3 Suresh Chand Gautam vs. State of uttar Pradesh Writ Petiton (Civil) No. 690 of 2015 Hon ble Supreme court of India 251-299 34. Further Ld. Counsel for the assessee during the course of hearing has referred to the following judicial pronouncements: i) No addition based on perception of culpability:- S.No. TITLE CITATION AUTHORITY Following Page No* 1 PCIT vs. Himachal Fibers Limited (2018) 98 taxmann.com 173 Hon ble Supreme Court of India 300-301 2 PCIT vs. Himachal Fibers Limited (2018) 98 taxmann.com 172 Hon ble High Court of Delhi 302 ii) No addition merely by reference to notorious practice:- S.No. TITLE CITATION AUTHORITY Following Page No. of LPB 1 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Malabar Industrial Co. Ltd. Vs. CIT (2000) 243 HR 83 (SC) The Hon ble Supreme Court 372 - 377 2. CIT vs. J.L. Morrison (India) Limitd (2014) 366 ITR 593 (Cal) The Hon ble High Court of Calcutta 378-405 3. Commissioner of Income Tax Vs. Max India Ltd. (2007) 213 CTR 0266 (SC) The Hon ble Supreme Court 406-407 4. Commissioner of Income Tax Vs. Nirav Modi (2017) 390 ITR 0292 The Hon ble High Court of Bombay 408-414 5. Hill Queen Investment (P) Ltd. vs. PCIT, (2021) 189 ITD 139 (Kol) The Hon ble High Court of Kolkata 415-433 6. Starpoint Construction (P) Ltd. Vs. PCIT (2022) 94 ITR TRIB (Trib) 299 (Kol) The Hon ble ITAT, Kolkata Bench 175 205 36. Thus there is no dispute to the fact that ..... X X X X Extracts X X X X X X X X Extracts X X X X
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