HRJ INTERNATIONAL PRIVATE LIMITED,INDORE V. PCIT INDORE-1, INDORE

ITA 252/IND/2024

AI Insights

HRJ International Pvt. Ltd. appealed against the revision-order passed by the Principal Commissioner of Income-Tax, which was based on the grounds that the original assessment did not adequately investigate the sources of funds used by shareholders to purchase shares. The Tribunal examined the procedures followed during the original assessment and found that the Assessing Officer did not conduct necessary inquiries regarding the nature and sources of funds of the shareholders, which was required under the Proviso to section 68 of the Income-tax Act. The Tribunal concluded that the revision was justified as the original assessment was deemed erroneous and prejudicial to the interest of the revenue.

• Counselvise Citation: [2026] 140 COUNSELVISE.COM (IT) 841231 (ITAT-INDORE)
• Duration Of Justice: 1 year(s) 11 month(s) 1 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 27-02-2026
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: DB
• Assessment Year: 2018-2019
• Appeal Filed On: 26-03-2024
• Laws Referred To: Income-tax Act, 1961
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: FORREVENUERESPONDENTCARRIEDUSTOTHEFOLLOWINGPARASOF; FORASSESSEEAPPELLANTCOULDONLYATTEMPTTO; SHRIANUPSINGH
• Assessee Lawyers: SUDHIR PADLIYA
• Keywords: Unexplained cash credit; Source of fund; Revision of order
• Section: 143(3); 142(1); 263; 68

Judgement Text

"Page 1 of 7 आयकरअपीलीयअिधकरण, इंदौरɊायपीठ, इंदौर IN THE INCOME TAX APPELLATE TRIBUNAL INDORE BENCH, INDORE BEFORE SHRI B.M. BIYANI, ACCOUNTANT MEMBER AND SHRI PARESH M. JOSHI, JUDICIAL MEMBER ITA No.252/Ind/2024 Assessment Year:2018-19 HRJ International Pvt. Ltd., 7/2 Indore Trade Centre, South Tukoganj NR. Nehru Statue Indore बनाम/ Vs. Pr. CIT Indore (Assessee/Appellant) (Revenue/Respondent) PAN: AACCH4574K Assessee by Shri Sudhir Padliya, AR Revenue by Shri Anup Singh, CIT-DR Date of Hearing 19.02.2026 Date of Pronouncement 27/02/2026 आदेश/ O R D E R Per B.M. Biyani, A.M.: Feeling aggrieved by revision-order dated 18.03.2024 passed by learned Pr. Commissioner of Income-Tax-1, Indore [“PCIT”] u/s 263 of Income-tax Act, 1961 [“the Act”] which in turn arises out of assessment-order dated 17.04.2021 passed by learned National e-Assessment Centre, Delhi [“AO”] u/s 143(3) of the act for Assessment-Year [“AY”] 2018-19, the assessee has filed this appeal on the grounds raised in Appeal-Memo (Form No. 36). Printed from counselvise.com HRJ International Pvt. Ltd. ITA No. 252/Ind/2024 – AY 2018-19 Page 2 of 7 2. The background facts leading to present appeal are as under: (i) The assessee is a closely-held company i.e. a company in which public are not substantially interested. For AY 2018-19, it filed return of income which was subjected to scrutiny-assessment and the AO completed assessment u/s 143(3) vide order dated 17.04.2021. (ii) Subsequently, Ld. PCIT examined the record of assessment- proceeding and viewed that the assessment-order passed by AO was erroneous in so far it is prejudicial to the interest of revenue which attracted revisionary-jurisdiction u/s 263. Accordingly, the PCIT issued show-cause notice dated 05.02.2024 and finally passed revision-order dated 18.03.2024 u/s 263. (iii) Aggrieved by such revision-order, the assessee has come in present appeal before us. 3. We have heard learned Representatives of both sides and carefully perused the case record including the impugned revision-order and the documents filed in Paper-Book in the light of provisions of law, to which our attention has been drawn. 4. Ld. DR for revenue/respondent carried us to the following paras of show-cause notice dated 05.02.2024 issued by Ld. PCIT: “4. On perusal of the case records, it is observed that the assessee, during the year under consideration has issued the shares as follows: Printed from counselvise.com HRJ International Pvt. Ltd. ITA No. 252/Ind/2024 – AY 2018-19 Page 3 of 7 Sr. No. Name of the share holder PAN No. Of shares Face value (in Rs.) Premium charged (in Rs.) 1 Shri Kapil Jaiswal AGBPJ6186D 55974 559740 70303699 2 Ms. Anchal Jaiswal ALUPJ1453D 6000 60000 7656000 Total 619740 77959699 4.1 As evident from the above, the assessee during the year under consideration has issued shares amounting to Rs. 7,85,79,439/-. During the course of assessment proceedings, the explanation of the persons regarding the nature and source of such credited was not inquired into from Shri Kapil Jaiswal and Ms Anchal Jaiswal. Therefore, the source of funds received by the assessee company on account of issuance of shares is deemed to be unexplained within the meaning of section 68 of the Act (as the persons to whom shares have been issued have not offered explanation) and accordingly, was liable to be added as unexplained cash credit of Rs. 7,85,79,439/- u/s 68 to the total income of the assessee by completing scrutiny assessment proceedings. 5. On further perusal of record, it is evident that the case of the assessee company was selected for complete scrutiny with one of the reasons \"Increase in Share Capital” as the assessee company during the year has issued shares amounting to Rs. 7,85,79,439/-. Accordingly, the same issue needed to be investigated in deep during the assessment proceeding; however, it has been observed that the explanation of the persons regarding the nature and source of such credited was not inquired into from Shri Kapil Jaiswal and Ms Anchal Jaiswal. It has also been observed from the case record that the assessee company hadn't co-operated during the assessment proceeding and not furnished the desired documents/submission as desired through the notices u/s 142(1) of the Act. It appears that submission and details available on records was not enough to verify the reasons of selection of the case under scrutiny. The Assessing Officer has not at all verified these issues and relevant facts involved therein while completing the assessment without any application of mind, without conducting proper inquiries and due verification. As such, the assessment is erroneous in the sense that it is prejudicial to the interest of revenue. You are therefore, required to show cause why provisions of section 263 be not invoked in your case for the reasons mentioned above as the order of NFAC dated 17.04.2021 for A.Y 2018-19, is erroneous in so far as it is prejudicial to the interest of revenue.” [emphasis supplied] Printed from counselvise.com HRJ International Pvt. Ltd. ITA No. 252/Ind/2024 – AY 2018-19 Page 4 of 7 5. Reading above paras word by word in open court and drawing our particular attention to the emphasized portion, Ld. DR submitted that the PCIT has undertaken revisionary action for the reason that the assessee- company issued shares to (i) Shri Kapil Jaiswal and (ii) Ms. Anchal Jaiswal but the AO, during scrutiny proceedings, did not enquire into the “sources” from which (i) Shri Kapil Jaiswal and (ii) Ms. Anchal Jaiswal made investment in assessee-company’s shares. 6. Thereafter, Ld. DR carried us to the bank statements/pass-books of (i) Shri Kapil Jaiswal and (ii) Ms. Anchal Jaiswal, available at Pages 30-47 & 54-59 of Paper-Book to demonstrate that (i) Shri Kapil Jaiswal and (ii) Ms. Anchal Jaiswal did not have their own funds for making investment in assessee’s shares; their bank statements clearly show that they received moneys from some external sources and by utilizing such moneys made investment in shares of assessee-company. 7. Having shown thus, Ld. DR referred following Proviso to section 68: “Provided that where the assessee is a company (not being a company in which the public are substantially interested), and the sum so credited consists of share application money, share capital, share premium or any such amount by whatever name called, any explanation offered by such assessee-company shall be deemed to be not satisfactory, unless— (a) the person, being a resident in whose name such credit is recorded in the books of such company also offers an explanation about the nature and source of such sum so credited; and Printed from counselvise.com HRJ International Pvt. Ltd. ITA No. 252/Ind/2024 – AY 2018-19 Page 5 of 7 (b) such explanation in the opinion of the Assessing Officer aforesaid has been found to be satisfactory:” 8. Ld. DR contended that in terms of above Proviso to section 68, the AO was obligated to make a 2nd stage enquiry i.e. enquiry qua the nature and sources available to (i) Shri Kapil Jaiswal and (ii) Ms. Anchal Jaiswal for making investment in shares of assessee. However, the AO did not make any such enquiry which he was required to make and therefore the assessment- order passed by AO is deemed to be erroneous-cum-prejudicial to the interest of revenue in terms of Clause (a) of Explanation-2 to section 263 re- produced below: “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 revenue, if in the opinion of the Principal Commissioner or Commissioner - (a) the order is passed without making inquiries or verification which should have been made; (b) XXX (c) XXX (d) XXX [emphasis supplied] 9. Replying to above, Ld. AR for assessee/appellant could only attempt to show that the AO made 1st stage enquiry i.e. the enquiries qua the amounts received by assessee-company from (i) Shri Kapil Jaiswal and (ii) Ms. Anchal Jaiswal towards issue of shares. But, however, he could not demonstrate any material to show that the AO made 2nd stage enquiry in terms of Proviso to section 68 as pointed out by Ld. DR i.e. the enquiry qua the nature and sources available to (i) Shri Kapil Jaiswal and (ii) Ms. Anchal Jaiswal for Printed from counselvise.com HRJ International Pvt. Ltd. ITA No. 252/Ind/2024 – AY 2018-19 Page 6 of 7 making investment in shares of assessee-company. When the bench repeatedly asked Ld. AR as to whether the AO made any 2nd stage enquiry, the Ld. AR accepted in open court that the material on record does not show any such enquiry having been done. 10. Thus, we do not find any evidence or material coming from assessee to substantiate that the AO has made any enquiry contemplated by Proviso to section 68. Therefore, the premise adopted by Ld. PCIT for making revision is valid. Faced with this situation, we have no hesitation in concluding that the present case perfectly fits in Clause (a) of the Explanation-2 to section 263, as re-produced earlier, according to which an order passed by the AO is deemed to be erroneous if the order is passed without making inquiries or verification which should have been made. Being so, we uphold the impugned revision-order and decline to interfere in the matter. The assessee fails in this appeal. 11. Resultantly, this appeal is dismissed. Order pronounced in open court on 27/02/2026 Sd/- Sd/- (PARESH M JOSHI) (B.M. BIYANI) JUDICIAL MEMBER ACCOUNTANT MEMBER Indore िदनांक/Dated : 27/02/2026 Patel/Sr. PS Printed from counselvise.com HRJ International Pvt. Ltd. ITA No. 252/Ind/2024 – AY 2018-19 Page 7 of 7 Copies to: (1) The appellant (2) The respondent (3) CIT (4) CIT(A) (5) Departmental Representative (6) Guard File By order UE COPYSr. Private Secretary Income Tax Appellate Tribunal Indore Bench, Indore Printed from counselvise.com "