Hebiscus Commotrade Pvt. Ltd., Kolkata V. CIT, KOLKATA-1, Kolkata

ITA 1105/KOL/2014

• Counselvise Citation: 110523514 RSA 2014
• Duration Of Justice: 1 year(s) 2 month(s) 10 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 30-07-2015
• Appeal Filed By: Assessee
• Order Result: Dismissed
• Bench Allotted: A
• Assessment Year: 2010-2011
• Appeal Filed On: 20-05-2014
• Result in Favour of: Revenue
• Court: TRIBUNAL
• Assessee Lawyers: SHRI
• Keywords: Bogus Share capital; Capital asset; Gift; Business income; Depreciation; Opportunity of being heard; Principle of natural justice; Period of limitation; Source of fund; Retrospective amendment; Question of law; Fair market value; Competent authority; Scheme of amalgamation; Capital receipt; Onus to prove; Time period of passing order; Reason to believe; Reassessment proceedings
• Section: 143(3); 142(1); 56(2); 153A; 133(6); 147; 68; 246; 69; 148; 263; 144

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL KOLKATA BENCHES : B : KOLKATA BEFORE SHRI R.S. SYAL, AM & SHRI N.V. VASUDEVAN, JM ITA NO.1104/KOL/2014 ASSESSMENT YEAR: 2009-10 M/S SUBHLAKSHMI VANIJYA PVT. LTD., 226/1, AJC BOSE ROAD, 6 TH FLOOR, KOLKATA 700 020. PAN: AALCS5695R (APPELLANT) VS. COMMISSIONER OF INCOME TAX,-I, AAYAKAR BHAWAN, P-7, CHOWRINGHEE SQUARE, KOLKATA 700 069. (RESPONDENT) ASSESSEE BY : SHRI RAJESH BAGRI,FCA ITA NO.1790/KOL/2013 ASSESSMENT YEAR: 2008-09 RAMSHILA ENTERPRISES PVT. LTD., 5 TH FLOOR, ROOM NO.503, NARAYANI BUILDING, 27, BRABOURNE ROAD, KOLKATA 700 001. PAN: AABCR3063J VS. COMMISSIONER OF INCOME TAX, KOLKATA-II, AAYAKAR BHAWAN, 3 RD FLOOR, P-7, CHOWRINGHEE SQUARE, KOLKATA 700 069. ITA NO.1104/KOL/2014 (M/S SUBHALAKSHMI VANIJYA PVT. L TD.) & 18 OTHER APPEALS OF DIFFERENT ASSESSEES 2 ITA NO.1905/KOL/2013 ASSESSMENT YEAR: 2008-09 TULSI TRACOM PVT. LTD., B-222, 2 ND FLOOR, OKHLA INDUSTRIAL AREA, PHASE-I, NEW DELHI 110 020. PAN: AACCT6121K VS. COMMISSIONER OF INCOME TAX, KOLKATA-II, AAYAKAR BHAWAN, 3 RD FLOOR, P-7, CHOWRINGHEE SQUARE, KOLKATA 700 069 (APPELLANTS) (RESPONDENTS) ASSESSEE BY: SHRI N.K. PODDAR , SR. COUNSEL, SMT. A.K. TIBREWA L & SHRI AMIT AGARWAL, ADVOCATES. ITA NO.1419/KOL/2013 ASSESSMENT YEAR: 2008-09 M/S LINSEY VINIMAY PVT. LTD., 2C, MAHENDRA ROAD, KOLKATA 700025. PAN:AABCL3787D VS. COMMISSIONER OF INCOME TAX-II, AAYAKAR BHAWAN, P-7, CHOWRINGHEE SQUARE, KOLKATA 700 069. ITA NO.1425/KOL/2013 ASSESSMENT YEAR : 2008-09 M/S BALAKA VINIMAY PVT. LTD., RAJESH MOHAN & ASSOCIATES, 34, GC AVENUE, 5 TH FLOOR, UNIT NO.18, KOLKATA 700 013. PAN: AABCO0670L VS. COMMISSIONER OF INCOME TAX, KOLKATA-II, P-7, CHOWRINGHEE SQUARE, AAYAKAR BHAWAN, KOLKATA 700 069. ITA NO.1104/KOL/2014 (M/S SUBHALAKSHMI VANIJYA PVT. L TD.) & 18 OTHER APPEALS OF DIFFERENT ASSESSEES 3 ITA NO.1213/KOL/2013 ASSESSMENT YEAR : 2009-10 M/S ORBITAL CONTRACTORS FINANCIERS PVT. LTD., 16, GANESH CHANDRA AVENUE, 7 TH FLOOR, KOLKATA 700 013. PAN: AAACO3799D (APPELLANTS) VS. COMMISSIONER OF INCOME TAX, KOLKATA-III, P-7, CHOWRINGHEE SQUARE, AAYAKAR BHAWAN, KOLKATA 700 069. (RESPONDENTS) ASSESSEE BY : SHRI K.M. ROY, FCA ITA NO.1262/KOL/2013 ASSESSMENT YEAR: 2008-09 M/S SATABDI VINCOM PVT. LTD., 52, WESTON STREET, KOLKATA 700012. PAN:AAKCS9972L VS. COMMISSIONER OF INCOME TAX-II, AAYAKAR BHAWAN, P-7, CHOWRINGHEE SQUARE, KOLKATA 700 069. ITA NO.1073/KOL/2014 ASSESSMENT YEAR: 2009-10 M/S PARASMANI COMMERCIAL PVT. LTD.,C/O RAJESH MOHAN & ASSOCIATES, CHARTERED ACCOUNTANTS, UNIT NO.18, 5 TH FLOOR, 34, GANESH CHANDRA AVENUE, KOLKATA 700013. PAN:AAECP9542 COMMISSIONER OF INCOME TAX-I, AAYAKAR BHAWAN, P-7, CHOWRINGHEE SQUARE, KOLKATA 700 069. ITA NO.1104/KOL/2014 (M/S SUBHALAKSHMI VANIJYA PVT. L TD.) & 18 OTHER APPEALS OF DIFFERENT ASSESSEES 4 ITA NO.1481/KOL/2013 ASSESSMENT YEAR: 2008-09 M/S RADHA KRISHNA TRADECOM PVT. LTD., 71, METCALFE STREET, KOLKATA 700013. PAN:AADCR7605N (APPELLANTS) COMMISSIONER OF INCOME TAX-I, AAYAKAR BHAWAN, P-7, CHOWRINGHEE SQUARE, KOLKATA 700 069. (RESPONDENTS) ASSESSEE BY : SHRI R.K. AGGARWAL, FCA, S.M. SURANA, ADVOCATE & SUNIL SURANA, ADVOCATE ITA NO.1499/KOL/2014 ASSESSMENT YEAR: 2008-09 M/S REWARD TIE-UP PVT. LTD., C/O SALARPURIA JAJODIA & CO., 7, CHITTARANJAN AVENUE, KOLKATA 700072. PAN:AADCR2573D VS. COMMISSIONER OF INCOME TAX-I, AAYAKAR BHAWAN, P-7, CHOWRINGHEE SQUARE, KOLKATA 700 069. ITA NO.2135/KOL/2013 ASSESSMENT YEAR : 2008-09 CAPETOWN MERCHANDISE PVT. LTD., ROOM NO.1B, 2 ND FLOOR, 542, GT ROAD (SOUTH), HOWRAH 711101. PAN: AADCC2015P VS. COMMISSIONER OF INCOME TAX, KOLKATA-II, P-7, CHOWRINGHEE SQUARE, AAYAKAR BHAWAN, KOLKATA 700 069. ITA NO.1104/KOL/2014 (M/S SUBHALAKSHMI VANIJYA PVT. L TD.) & 18 OTHER APPEALS OF DIFFERENT ASSESSEES 5 ITA NO.1465/KOL/2013 ASSESSMENT YEAR : 2008-09 M/S VINAYAK FINANCIAL CONSULTANT PVT. LTD., C/O SALARPURIA JAJODIA & CO., 7, CR AVENUE, KOLKATA 700 072. PAN: AACCV6187E VS. COMMISSIONER OF INCOME TAX, KOLKATA-III, P-7, CHOWRINGHEE SQUARE, AAYAKAR BHAWAN, KOLKATA 700 069. ITA NO.861/KOL/2014 ASSESSMENT YEAR : 2009-10 ORBIT VINTRADE PVT.LTD., C/O RSVPC & COMPANY, 41A, ACH. JC BOSE ROAD, SUITE NO.613, KOLKATA 700 014. PAN: AABCO0670L (APPELLANTS) COMMISSIONER OF INCOME TAX, KOLKATA-II, P-7, CHOWRINGEE SQUARE, AAYAKAR BHAWAN, KOLKATA 700 069 (RESPONDENTS) ASSESSEE BY : SHRI SUJOY SEN, ADVOCATE ITA NO.1365/KOL/2013 ASSESSMENT YEAR: 2008-09 M/S MARIGOLD NIRMAN PVT. LTD., 27, SIR R.N. MUKHERJEE ROAD, KOLKATA 700001. PAN:AAFCM0455M COMMISSIONER OF INCOME TAX-II, AAYAKAR BHAWAN, P-7, CHOWRINGHEE SQUARE, KOLKATA 700 069. ITA NO.1104/KOL/2014 (M/S SUBHALAKSHMI VANIJYA PVT. L TD.) & 18 OTHER APPEALS OF DIFFERENT ASSESSEES 6 ITA NO.1386/KOL/2013 ASSESSMENT YEAR: 2008-09 M/S KASTURI HOME PVT. LTD., 85, METCALFE STREET, 2 ND FLOOR, ROOM NO.206, KOLKATA 700013. PAN:AADCK0548F COMMISSIONER OF INCOME TAX-II, AAYAKAR BHAWAN, P-7, CHOWRINGHEE SQUARE, KOLKATA 700 069. (RESPONDENT) ITA NO.1385/KOL/2013 ASSESSMENT YEAR: 2008-09 M/S ARADHANA PLAZA PVT. LTD., 27, SIR R.N. MUKHERJEE ROAD, KOLKATA 700001. PAN:AAGCA2835A (APPELLANT) VS. COMMISSIONER OF INCOME TAX-II, AAYAKAR BHAWAN, P-7, CHOWRINGHEE SQUARE, KOLKATA 700 069. (RESPONDENT) ASSESSEE BY : SHRI S.K. TULSIYAN, ADVOCATE ITA NO.1538/KOL/2013 ASSESSMENT YEAR: 2008-09 MADHUBAN VYAPAR PVT. LTD., 255, RABINDRA SARANI, 4 TH FLOOR, ROOM NO.3, KOLKATA 700007. PAN:AAFCM1858E (APPELLANT) COMMISSIONER OF INCOME TAX-I, AAYAKAR BHAWAN, P-7, CHOWRINGHEE SQUARE, KOLKATA 700 069. (RESPONDENT) ASSESSEE BY : SHRI SUBHASH AGGARWAL & SHRI BRIJESH KUMAR, ADVOCATES ITA NO.1104/KOL/2014 (M/S SUBHALAKSHMI VANIJYA PVT. L TD.) & 18 OTHER APPEALS OF DIFFERENT ASSESSEES 7 ITA NO.1809/KOL/2013 ASSESSMENT YEAR: 2008-09 BANKE BEHARI CONSTRUCTION PVT. LTD., 4, BBD BAGH (E), STEPHEN HOUSE, 5 TH FLOOR, ROOM NO.77, KOLKATA 700001. PAN:AADCB1786G VS. COMMISSIONER OF INCOME TAX-II, AAYAKAR BHAWAN, P-7, CHOWRINGHEE SQUARE, KOLKATA 700 069. ITA NO.1105/KOL/2014 ASSESSMENT YEAR: 2010-11 HEBISCUS COMMOTRADE PVT. LTD., 9/12, LAL BAZAR STREET, MERCANTILE BUILDING, 3 RD FLOOR, KOLKATA 700001. PAN:AADCB7777K (APPELLANTS) COMMISSIONER OF INCOME TAX-II, AAYAKAR BHAWAN, P-7, CHOWRINGHEE SQUARE, KOLKATA 700 069. (RESPONDENTS) ASSESSEE BY : SHRI RAJESH KUMAR DUGGAR, FCA & SHRI A.K. UPADHYAY, ADVOCATE DEPARTMENT IN ALL APPEALS BY : S/SHRI SACHCHIDANAND SRIVASTAVA, NIRAJ KUMAR & DR. ADHIR KUMAR BAR, CITS, DRS DATES OF HEARING : FROM 14.07.2015 TO 23.07.2015 DATE OF PRONOUNCEMENT : .07.2015 ITA NO.1104/KOL/2014 (M/S SUBHALAKSHMI VANIJYA PVT. L TD.) & 18 OTHER APPEALS OF DIFFERENT ASSESSEES 8 ORDER PER R.S. SYAL, AM: THROUGH THIS BATCH OF APPEALS, DIFFERENT ASSESSES ASSAIL THE CORRECTNESS OF SEPARATE ORDERS PASSED BY THE COMMIS SIONERS OF INCOME- TAX (CIT) U/S 263 OF THE INCOME-TAX ACT, 1961 (HERE INAFTER ALSO CALLED THE ACT) IN RELATION TO THE ASSESSMENT YEARS 2008 -09 AND 2009-10. SINCE ALL THESE APPEALS ARE BASED ON LARGELY SIMILA R FACTS AND COMMON GROUNDS OF APPEAL, WE ARE PROCEEDING TO DISPOSE THE M OFF BY THIS CONSOLIDATED ORDER FOR THE SAKE OF CONVENIENCE. 2. SUCCINCTLY, THE FACTS OF M/S SUBHLAKSHMI VANIJY A PVT. LTD. ARE THAT THIS ASSESSEE FILED ITS RETURN ON 2.2.2010 DEC LARING TOTAL INCOME OF RS.1,478/-. THE RETURN WAS PROCESSED U/S 143(1) OF THE ACT. THE ASSESSEE, VIDE ITS UNDATED LETTER SUBMITTED ON 31.1 2.2010, STATED BEFORE THE ASSESSING OFFICER (AO) THAT INCOME OF RS.18,449 /- EARNED BY IT WAS OMITTED TO BE OFFERED FOR TAXATION. THE AO ISSUED NOTICE U/S 148 OF THE ACT ON 14.1.2011 AND COMPLETED THE ASSESSMENT. APA RT FROM MAKING ADDITION OF RS.18,449/-, WHICH WAS BROUGHT TO THE N OTICE OF THE AO BY THE ASSESSEE ITSELF AND A FURTHER ADDITION OF RS.9, 600/- ON ACCOUNT OF ITA NO.1104/KOL/2014 (M/S SUBHALAKSHMI VANIJYA PVT. L TD.) & 18 OTHER APPEALS OF DIFFERENT ASSESSEES 9 PRELIMINARY EXPENSES, THE AO OBSERVED DURING THE CO URSE OF SUCH PROCEEDINGS THAT THE ASSESSEE ISSUED FRESH SHARE CA PITAL OF RS.14,71,800/- ON PREMIUM OF RS.7,21,18,200/-. NOTICES U/S 133(6 ) WERE ISSUED TO EIGHT SUBSCRIBERS TO THE SHARE CAPITAL OUT OF TOTAL 21 SUBSCRIBERS. REPLIES TO SUCH NOTICES WERE RECEIVED CONFIRMING SUBSCRIPTI ON TO THE EQUITY SHARE CAPITAL OF THE ASSESSEE COMPANY AT PREMIUM. CONSIDE RING THESE REPLIES, THE AO FINALIZED THE ASSESSMENT AT A TOTAL INCOME O F RS.29,530/-, BY MAKING THE AFORENOTED ADDITIONS OF RS.28,049/-. 3. THE LD. CIT, ON PERUSAL OF THE ASSESSMENT REC ORD, OBSERVED THAT THE ISSUE OF SHARE CAPITAL WITH HUGE SHARE PREMIUM, WAS NOT PROPERLY EXAMINED BY THE AO INASMUCH AS NOTICES WERE ISSUED U/S 133(6) TO ONLY EIGHT SUBSCRIBERS AGAINST THE TOTAL NUMBER OF 21 SU BSCRIBERS OF THE ASSESSEE COMPANY. HE FURTHER NOTICED THAT REPLIES IN RESPONSE TO NOTICES U/S 133(6) WERE RECEIVED IN THE OFFICE OF THE AO, W HICH APPEARED TO HAVE BEEN PREPARED BY A SINGLE PERSON AS THESE WERE MORE OR LESS IN THE SAME FORMAT AND LANGUAGE. IN THIS BACKDROP OF THE FACTS , IT WAS OPINED THAT THE ENTIRE EXERCISE OF FILING CONFIRMATIONS WAS STAGE-M ANAGED BY A SINGLE ITA NO.1104/KOL/2014 (M/S SUBHALAKSHMI VANIJYA PVT. L TD.) & 18 OTHER APPEALS OF DIFFERENT ASSESSEES 10 PERSON OR A GROUP OF PERSONS TO COMPLETE THE FORMAL ITIES OF FILING CONFIRMATIONS SO AS TO LEND SEMBLANCE OF CREDIBILIT Y TO THE SUBSCRIPTION OF SHARE CAPITAL WITH HUGE PREMIUM. THE AO WAS FOU ND TO HAVE NOT CROSS-EXAMINED THE SUBSCRIBERS NOR RECORDED STATEME NT OF ANY OF THE DIRECTORS OF THE ASSESSEE OR SUBSCRIBER COMPANIES. IT WAS ALSO NOTED THAT THE ASSESSEES BALANCE SHEET REFLECTED INVESTMENTS OF RS.8.80 CRORE IN SHARES OF SOME OTHER RELATIVELY NEW PRIVATE LIMITED COMPANIES AT MUCH HIGHER PRICE THAN THEIR REAL WORTH. IN THE OPINION OF THE LD. CIT, THE AO FAILED TO CARRY OUT PROPER INVESTIGATION OF THE MA TTER. HE ALSO TOOK NOTE OF A RACKET UNDER WHICH A LARGE NUMBER OF COMPANIES WERE FLOATED IN IDENTICAL MANNER APPARENTLY SHOWING TO HAVE INTRODU CED SHARE CAPITAL AT A HUGE PREMIUM BY ROTATING THE UNACCOUNTED MONEY. HE OBSERVED THAT THE AO OUGHT TO HAVE CONDUCTED THOROUGH ENQUIRY INT O AT LEAST 2-3 LAYERS TO REACH THE SOURCE OR THE REAL INVESTOR. CONSIDERI NG THE FACT THAT ISSUE OF A SHARE WITH A FACE VALUE OF RS.10/- BY THE ASSESSE E COMPANY AT A PREMIUM OF RS.490/- PER SHARE REQUIRED THOROUGH EXA MINATION BY THE AO, WHICH HE FAILED TO CARRY OUT, THE LD. CIT, AFTE R CONSIDERING THE ITA NO.1104/KOL/2014 (M/S SUBHALAKSHMI VANIJYA PVT. L TD.) & 18 OTHER APPEALS OF DIFFERENT ASSESSEES 11 OBJECTIONS OF THE ASSESSEE, CAME TO HOLD THAT THE ASSESSMENT ORDER WAS RENDERED ERRONEOUS AND PREJUDICIAL TO THE INTEREST OF THE REVENUE. HE, THEREFORE, SET ASIDE THE ASSESSMENT ORDER WITH A DI RECTION TO THE AO FOR MAKING A FRESH ASSESSMENT AFTER CONDUCTING INDEPEND ENT, DETAILED AND COMPLETE ENQUIRIES INTO THE SUBSCRIPTION TO THE SHA RE CAPITAL AND PREMIUM INTRODUCED IN THIS CASE AND ALSO THE INVEST MENTS OF RS.8.80 CRORE ALLEGEDLY MADE BY THE ASSESSEE IN CERTAIN OTH ER SUCH COMPANIES. THE ASSESSEE IS AGGRIEVED AGAINST THE IMPUGNED ORDE R. 4. THERE IS ANOTHER CASE, NAMELY, M/S RAMSHILA E NTERPRISES PVT. LTD., WHICH HAS BEEN ARGUED BEFORE US FOR FOUR DAYS AT A STRETCH. WE HAVE A QUICK LOOK AT ITS FACTS. THIS ASSESSEE FILED ITS R ETURN DECLARING TOTAL INCOME AT RS. NIL. THE RETURN WAS PROCESSED U/S 143 (1). THE CASE WAS REOPENED BY MEANS OF NOTICE U/S 148. DURING THE COU RSE OF ASSESSMENT PROCEEDINGS, IT WAS NOTICED BY THE AO THAT THIS COM PANY HAD ISSUED SHARES WITH FACE VALUE OF RS.10 AT A PREMIUM OF RS. 190. NOTICES U/S 133(6) WERE ISSUED TO SOME OF THE SUBSCRIBERS. REPL IES WERE RECEIVED. NO FURTHER INQUIRIES ON THE QUESTION OF ISSUE OF SH ARE CAPITAL AT PREMIUM ITA NO.1104/KOL/2014 (M/S SUBHALAKSHMI VANIJYA PVT. L TD.) & 18 OTHER APPEALS OF DIFFERENT ASSESSEES 12 WERE CONDUCTED. ASSESSMENT WAS FINALIZED ON THE TO TAL INCOME OF RS.20,447 MAKING CERTAIN DISALLOWANCES. THE LD. CIT SET ASIDE THE ASSESSMENT ORDER ON MORE OR LESS THE SAME REASONING AS GIVEN IN THE CASE OF M/S SUBHLAKSHMI VANIJYA PVT. LTD. AND DIRECTED T HE AO TO REFRAME THE ASSESSMENT FRESH ON THE LINES AS DIRECTED BY HI M IN THE CASE OF M/S SUBHLAKSHMI VANIJYA PVT. LTD. 5. FACTS AND CIRCUMSTANCES OF THE OTHER COMPANIE S IN THIS BATCH OF APPEALS ARE MUTATIS MUTANDIS SIMILAR TO THOSE DISCUSSED ABOVE. ALL THE LD. COUNSEL REPRESENTING SUCH COMPANIES HAVE ADMITT ED ABOUT THE SIMILARITY OF FACTS BETWEEN THEIR RESPECTIVE CASES AND THOSE OF M/S SUBHLAKSHMI VANIJYA PVT. LTD. AND RAM SHILA ENTERPR ISES PVT. LTD., WITH MINOR BUT INCONSEQUENTIAL CHANGES. SUCH COMPANIES A LSO ISSUED SHARES AT A HUGE PREMIUM (RANGING FROM RS.90 TO RS.490 PER SHARE HAVING FACE VALUE OF RS.10) AND MADE INVESTMENTS IN THE SHARES OF OTHER PRIVATE LIMITED COMPANIES AT A VERY HIGH PRICE. IN ALL THES E CASES, RETURNS WERE FILED WITH MEAGER INCOME. EITHER THE ATTENTION OF T HE AOS WAS INVITED BY THESE ASSESSEES TOWARDS SOME NOMINAL INCOME NOT PRO PERLY OFFERED FOR ITA NO.1104/KOL/2014 (M/S SUBHALAKSHMI VANIJYA PVT. L TD.) & 18 OTHER APPEALS OF DIFFERENT ASSESSEES 13 TAXATION OR THE AOS SUO MOTU NOTICED SOME ESCAPEMENT. REASSESSMENTS WERE MADE U/S 147 MAKING ADDITIONS FOR NOMINAL AMOU NTS, AFTER THOSE AOS ISSUING NOTICES U/S 133(6) TO SOME OF THE SUBS CRIBERS AND GETTING SATISFIED WITH THE GENUINENESS OF RECEIPT OF SHARE CAPITAL WITH PREMIUM WITHOUT RECORDING STATEMENTS OF THE DIRECTORS EITHE R OF SUCH COMPANIES OR THOSE OF INVESTEE COMPANIES, WHOSE SHARES WERE PURCHASED AT A MUCH HIGHER VALUE. IN ALL SUCH CASES, THE LD. CITS HAVE SET ASIDE SUCH ASSESSMENT ORDERS U/S 263 AND DIRECTED THE AOS TO CONDUCT PROPER ENQUIRY BEFORE DECIDING THE MATTER. ALL THE ASSES SEES IN THIS BATCH OF APPEALS ARE AGGRIEVED AGAINST THE ORDERS PASSED U/S 263 OF THE ACT. 6. THE LD. ARS HAVE MADE ELABORATE SUBMISSIONS ON V ARIOUS ASPECTS OF THE ISSUE, WHICH WE DISCUSS INFRA AT APPROPRIATE PLACES. 7. THE LD. DR TRIED TO EXPLAIN THE MODUS OPERANDI OF CONVERSION OF BLACK MONEY INTO WHITE THROUGH THE MEDIUM OF COMPAN IES INSTANTLY BEFORE US AND OTHERS WHOSE APPEALS HAVE EITHER BEEN FIXED ALONG WITH THIS BATCH OF APPEALS OR ARE YET TO BE FIXED, WITH THE HELP OF A SIMPLE ILLUSTRATION. HE EXPLAINED THAT THE ENTIRE EPISODE IS COMPLETED THROUGH ITA NO.1104/KOL/2014 (M/S SUBHALAKSHMI VANIJYA PVT. L TD.) & 18 OTHER APPEALS OF DIFFERENT ASSESSEES 14 THREE LEVELS. IN THE FIRST LEVEL, COMPANY A IS IN CORPORATED ON PAPERS, WHICH DOES NOT CARRY OUT ANY SUBSTANTIAL BUSINESS A CTIVITY. SUPPOSE, THIS COMPANY ISSUES TEN SHARES TO ANOTHER DUMMY COMPANY, SAY X WITH FACE VALUE OF RS.1/- AT A PREMIUM OF RS.49, RAISING ITS SHARE CAPITAL TO RS.500/-. THE SUM OF RS.500/- STANDING ON THE LIAB ILITY SIDE OF THE BALANCE SHEET OF COMPANY A IS EQUALIZED WITH INVEST MENT IN SHARES OF COMPANY B, WHICH IS AGAIN A PAPER COMPANY, AT A M UCH HIGHER PRICE THAN ITS REAL WORTH. COMPANY B, IN TURN, GETS RS.500/- AND INVESTS THE SAME IN THE SHARES OF ANOTHER DUMMY PRIVATE LIM ITED COMPANY C, AGAIN AT A HUGE UNDESERVING MARKET PRICE. THIS PR OCESS GOES ON AS THE SAME AMOUNT OF RS.500 IS ROTATED THROUGH VARIOUS DU MMY COMPANIES EVENTUALLY SHOWING THEIR CAPITAL AND SHARE PREMIUM AT RS.500/- REPRESENTED BY INVESTMENT IN SHARES OF OTHER DUMMY COMPANIES BY EQUAL AMOUNT OF RS.500/- SUBJECT TO THE DEDUCTION OF CERT AIN EXPENSES INCURRED OR SOME PETTY INCOME EARNED. IN THE SECOND LEVEL, A PERSON, SAY MR. Y, INTENDING TO CONVERT HIS BLACK MONEY INTO WHITE ENT ERS INTO A DEAL WITH COMPANY X, WHO IS SHAREHOLDER OF COMPANY A. COM PANY X SELLS ITS ITA NO.1104/KOL/2014 (M/S SUBHALAKSHMI VANIJYA PVT. L TD.) & 18 OTHER APPEALS OF DIFFERENT ASSESSEES 15 SHARES OF COMPANY A WITH THE PURCHASE PRICE OF RS.5 00 AT ITS REAL WORTH, SAY, RS.6 PER SHARE. MR. Y PURCHASING SHARES OF COM PANY A FOR APPARENT CONSIDERATION OF RS.6, PAYS RS.494/- IN CASH AND, T HUS, ACQUIRES ALL THE SHARES OF COMPANY A WITH APPARENT INVESTMENT OF R S.6/- AND REAL INVESTMENT OF RS.500/-. MR. Y RETAINS THESE SHARES FOR A PERIOD EXCEEDING ONE YEAR. IN THE THIRD LEVEL, THE OPERAT ORS WHO HAVE CREATED THIS WEB OF DUMMY COMPANIES ASSIST MR. Y IN SELLIN G THE SHARES OF COMPANY A AT RS.500/- THROUGH FICTIOUS TRANSACT IONS ENTERED INTO WITH MR. Z. MR. Y REALIZES RS.500/- IN CASH AND BRINGS THIS AMOUNT INTO CIRCULATION. PROFIT OF RS.494/- [RS.500(SALES PRIC E) MINUS RS.6(APPARENT PURCHASE PRICE)] EARNED BY MR. Y IS N OT CHARGEABLE TO TAX IN TERMS OF SECTION 10(38) AS IT ARISES `FROM THE T RANSFER OF A LONG-TERM CAPITAL ASSET, BEING AN EQUITY SHARE IN A COMPANY. THAT IS HOW, MR. Y CONVERTS RS. 494/- FROM BLACK TO WHITE. THE SHARES OF COMPANY A ARE SOLD THROUGH OPERATORS TO MR. Z, WHO IS INTERESTED IN PURCHASING SHARE LOSS. MR. Z TREATS THE SHARES OF COMPANY A EITHER AS HIS STOCK IN TRADE OR INVESTMENT, DEPENDING UPON HIS REQUIREMENT. IF THE SE SHARES PURCHASED ITA NO.1104/KOL/2014 (M/S SUBHALAKSHMI VANIJYA PVT. L TD.) & 18 OTHER APPEALS OF DIFFERENT ASSESSEES 16 FOR AN APPARENT CONSIDERATION OF RS.500 ARE HELD BY MR. Z AS STOCK IN TRADE, THEN AT THE END OF THE YEAR, HE WILL VALUE SUCH STOCK IN TRADE AT MARKET PRICE, SAY AT RS.10. BY DOING SO, HE WILL SH OW A LOSS OF RS.490 FROM THE VALUATION OF SHARES, WHICH WILL BE ADJUSTE D AGAINST HIS NORMAL BUSINESS INCOME TO THIS EXTENT. IF MR. Z TREATS THE SE SHARES AS INVESTMENT, THEN THE OPERATOR WILL HELP HIM IN SELLING THE SHAR ES AT THEIR MARKET PRICE OF RS.10. LOSS FROM THE SALE OF INVESTMENT, BEING LOSS UNDER THE HEAD `CAPITAL GAIN, WILL BE SET OFF AGAINST ANY OTHER CAPITAL GAIN GENUINELY EARNED BY MR. Z. THIS IS THE ENTIRE MECHANISM BY WH ICH MR. Y, WHO PURCHASED THE SHARES OF COMPANY A HAS SUCCEEDED IN CONVERTING HIS BLACK MONEY OF RS. 494 INTO WHITE. IN THE SAME MA NNER, MR. Y1 AND MR. Y2 ETC. CONVERT THEIR BLACK MONEY OF RS.494 IN TO WHITE BY PURCHASING THE SHARES OF COMPANY B AND COMPANY C ET C. THE END RESULT IS ACHIEVED BY OPERATORS BY ROUTING THE TRANSACTION S OF SHARES THROUGH SEVERAL LAYERS OF COMPANIES, THEREBY GIVING COLOUR OF GENUINENESS, WHICH IN REALITY IS NOTHING BUT A CAMOUFLAGE. THE L D. DR EXPLAINED THAT IN THE INSTANT APPEALS, WE ARE CONCERNED WITH THE F IRST LEVEL IN WHICH ITA NO.1104/KOL/2014 (M/S SUBHALAKSHMI VANIJYA PVT. L TD.) & 18 OTHER APPEALS OF DIFFERENT ASSESSEES 17 SHARE WORTH RS.10/- ARE ISSUED FOR RS.500/- AND THE ASSESSEE HAS ALSO MADE INVESTMENT IN THE SHARES OF OTHER PAPER COMPAN IES AT HUGE PRICE, NOT IN CONFORMITY WITH ITS MARKET WORTH, AND SUCH COMPANIES ARE NOT CARRYING ON ANY WORTHWHILE BUSINESS ACTIVITY. 8. THE LD. DR EXPLAINED THAT THERE ARE HUNDREDS OF APPEALS ON THIS ISSUE BEFORE THE KOLKATA BENCHES OF THE TRIBUNAL IN ALL OF WHICH RETURNS WERE FILED BY SUCH COMPANIES WITH MEAGER INCOME; I NTIMATIONS WERE ISSUED U/S 143(1); THEREAFTER NOTICES U/S 148 WERE ISSUED EITHER AT THE INSTANCE OF SUCH COMPANIES DIVULGING A PALTRY ESCAP EMENT OF INCOME OR OTHERWISE ; ASSESSMENT ORDERS WERE PASSED U/S 143( 3) READ WITH SECTION 147 AFTER MAKING NOMINAL ADDITIONS AND THE AOS, DUR ING THE COURSE OF SUCH ASSESSMENT PROCEEDINGS, MADE SOME FORMAL ENQUI RIES ABOUT SHARES ISSUED BY SUCH COMPANIES AT HUGE PREMIUM BY ISSUING NOTICES U/S 133(6) TO SOME OF THE SHAREHOLDERS AND GETTING SATISFIED W ITHOUT ANY FURTHER INVESTIGATION. THE JURISDICTIONAL CITS HAVE PASSED ORDERS U/S 263 IN ALL SUCH CASES, WHICH HAVE BEEN ASSAILED BEFORE THE TRI BUNAL. ITA NO.1104/KOL/2014 (M/S SUBHALAKSHMI VANIJYA PVT. L TD.) & 18 OTHER APPEALS OF DIFFERENT ASSESSEES 18 9. WE HAVE HEARD SHRI N.K. PODDAR, SR. ADVOCATE, SH . RAJESH BAGREE, SHRI K.M. ROY, SHRI R.K. AGGARWAL, SHRI RAJ ESH KUMAR DUGGAR, C.A.S, SMT. A.K. TIBREWAL, SHRI AMIT AGARW AL, SH. S.M. SURANA, SH. SUNIL SURANA, SHRI SUJOY SEN, SHRI S.K . TULSIYAN, SHRI SUBHASH AGGARWAL, SHRI BRIJESH KUMAR, SHRI A.K. UP ADHYAY, ADVOCATES (HEREINAFTER ALSO COMMONLY REFERRED TO AS THE `LD. AR FOR CONVENIENCE), S/SHRI SACHCHIDANAND SRIVASTAVA, NIR AJ KUMAR & DR. ADHIR KUMAR BAR, THE LD. CIT, DRS (HEREINAFTER COMM ONLY REFERRED TO AS THE `LD. DR FOR CONVENIENCE). NOW WE PROCEED TO D ECIDE THE QUESTION OF VALIDITY OF THE ORDERS PASSED BY THE LD. CIT U/S 263 OF THE ACT IN THIS BATCH OF APPEALS. DETAILED WRITTEN AND ORAL SUBMISS IONS ADVANCED BY BOTH THE SIDES HAVE BEEN TAKEN INTO CONSIDERATION I N THE LIGHT OF MATERIAL PLACED BEFORE US AND PRECEDENTS RELIED ON. 10. THE PRIMARY QUESTION WHICH ARISES FOR OUR CO NSIDERATION IS AS TO WHETHER THE CITS WERE WITHIN THEIR POWER TO REVISE THE ASSESSMENT ORDERS PASSED BY THE AOS U/S 143(3) READ WITH SECTI ON 147? A VIEW HAS BEEN CANVASSED BY THE LD. CITS IN ALL THE CASES UND ER CONSIDERATION THAT ITA NO.1104/KOL/2014 (M/S SUBHALAKSHMI VANIJYA PVT. L TD.) & 18 OTHER APPEALS OF DIFFERENT ASSESSEES 19 THE RESPECTIVE AOS SHOULD HAVE CARRIED OUT PROPER I NVESTIGATION BEFORE ACCEPTING THE GENUINENESS OF THE RECEIPT OF SHARE C APITAL AT SUCH A HUGE PREMIUM. IMPROPER EXAMINATION OF THIS ASPECT, IN TH E OPINION OF THE LD. CITS, HAS LED TO THE PASSING OF ERRONEOUS ORDERS W HICH ARE PREJUDICIAL TO THE INTEREST OF THE REVENUE. IN ORDER TO ANSWER TH IS MAIN QUESTION ON MERITS, WE NEED TO EXAMINE TWO BROADER QUESTIONS : - A) WHETHER THE PROVISIONS OF SECTION 68 CAN BE ATTR ACTED IF SHARE CAPITAL WITH PREMIUM IS NOT PROPERLY EXPLAINED BY THE ASSES SEE COMPANY?; AND B) WHETHER THE FAILURE OF THE AO TO GIVE A LOGICAL CONCLUSION TO THE ENQUIRY CONDUCTED BY HIM GIVES POWER TO THE CIT TO REVISE SUCH ASSESSMENT ORDER? 11. ADVERTING TO THE FACTS OF THE CASE OF M/S SUBHL AKSHMI VANIJYA PVT. LTD., WE FIND THAT IT ISSUED SHARES WITH FACE VALU E OF RS.10 AT A PREMIUM OF RS.490/- PER SHARE. IN THIS PROCESS, THE INCREA SE IN THE PAID UP SHARE CAPITAL BY A SUM OF RS.14,71,800/- WAS COUPLED WITH INCREASE IN SHARE PREMIUM AMOUNTING TO RS.7.21 CRORE. ITS BALANCE SH EET DEPICTED INVESTMENT OF RS.8.80 CRORE WHICH WAS ALSO REPRESEN TED BY SHARES OF ITA NO.1104/KOL/2014 (M/S SUBHALAKSHMI VANIJYA PVT. L TD.) & 18 OTHER APPEALS OF DIFFERENT ASSESSEES 20 SOME OTHER PRIVATE COMPANIES AT A HUGE PRICE WITH T RIVIAL BACKGROUNDS. THE AO DID EXAMINE CERTAIN ASPECTS OF THIS ISSUE DU RING THE COURSE OF REASSESSMENT PROCEEDINGS BY ISSUING NOTICES U/S 133 (6) TO SOME OF THE SUBSCRIBERS TO THE SHARE CAPITAL. AFTER OBTAINING DETAILS ABOUT SOME OF THE SHAREHOLDERS, SUCH AS THEIR PANS, INVESTMENT TH ROUGH BANKING CHANNEL ETC., THE AO KEPT SUCH REPLIES ON RECORD WI THOUT CONSIDERING IT APPROPRIATE TO PERSONALLY EXAMINE THE DIRECTORS OF THE SHAREHOLDER COMPANIES OR FINDING OUT THE SOURCE OF INVESTMENT BY SUCH SHAREHOLDERS IN THE LIGHT OF THE FACT THAT THE SHARES WITH FACE VALUE OF RS. 10 OF THE ASSESSEE, A RELATIVELY NEW PRIVATE COMPANY NOT HAVI NG ANY SUBSTANTIAL SOURCE OF INCOME, WERE CLAIMED TO HAVE BEEN ISSUED AT A HUGE PREMIUM OF RS.490 PER SHARE. 12. SIMILAR IS THE POSITION ABOUT OTHER APPEALS I N THIS BATCH. THE LD. CITS IN THE IMPUGNED ORDERS HAVE NOTICED THAT THES E CASES FORM PART OF LARGE NUMBER OF CASES IN WHICH SHARE CAPITAL IS SHO WN TO HAVE BEEN INTRODUCED BY ROTATING THE UNACCOUNTED MONEY THROUG H VARIOUS COMPANIES OR ENTITIES. SUCH INTRODUCTION OF SHARE CAPITAL WAS SHOWN IN ITA NO.1104/KOL/2014 (M/S SUBHALAKSHMI VANIJYA PVT. L TD.) & 18 OTHER APPEALS OF DIFFERENT ASSESSEES 21 LARGE NUMBER OF CASES ON THE BASIS OF DUMMY COMPANI ES, WHICH WERE CREATED SOLELY FOR THE PURPOSE OF BUILDING UP SHARE CAPITAL. HE FURTHER NOTICED THE MODUS OPERANDI OF INTRODUCTION OF SUCH BOGUS SHARE CAPITAL WITH UNACCOUNTED CASH GETTING DEPOSITED IN THE ACCO UNTS OF DIFFERENT PERSONS/COMPANIES AND CHEQUES GOING FROM THESE ACCO UNTS TO VARIOUS OTHER COMPANIES AND, AFTER ROTATING THE MONEY IN 3- 4 LAYERS, GETTING INTRODUCED AS SHARE CAPITAL IN OTHER COMPANIES. A) WHETHER THE PROVISIONS OF SECTION 68 CAN BE ATTR ACTED IF SHARE CAPITAL WITH PREMIUM IS NOT PROPERLY EXPLAINED BY THE ASSES SEE COMPANY? 13.A. NOW, WE TURN TO THE FIRST BROADER QUESTION AS TO WHETHER THE PROVISIONS OF SECTION 68 CAN BE ATTRACTED IN CASE T HE SHARE CAPITAL WITH PREMIUM IS NOT PROPERLY EXPLAINED BY THE ASSESSEE C OMPANY? THE LD. AR ARGUED THAT THE AO IS NOT EMPOWERED TO EXAMINE A NY ASPECT OF THE ISSUE OF SHARE CAPITAL WITH PREMIUM IN THE HANDS OF A COMPANY. RELYING ON THE JUDGMENT OF THE HONBLE SUPREME COURT IN THE CASE OF CIT VS. LOVELY EXPORTS PVT. LTD. (2008) 216 CTR 195(SC), HE VEHEMENTLY ARGUED THAT NO ADDITION CAN BE MADE IN THE HANDS OF A COMPANY FOR ITA NO.1104/KOL/2014 (M/S SUBHALAKSHMI VANIJYA PVT. L TD.) & 18 OTHER APPEALS OF DIFFERENT ASSESSEES 22 UNEXPLAINED OR IMPROPERLY EXPLAINED ISSUE OF SHARE CAPITAL. IT WAS PUT FORTH THAT IF THE SHARE TRANSACTIONS ARE NOT GENUIN E, THEN, THE ADDITION CAN BE MADE U/S 69 IN THE HANDS OF SUCH SHAREHOLDERS AN D NOT U/S 68 IN THE ASSESSMENT OF THE COMPANY. TAKING HIS ARGUMENT TO N EXT LEVEL, IT WAS STATED THAT THE FINANCE ACT, 2012 HAS INSERTED A PR OVISO TO SECTION 68 W.E.F. 1.4.2013, WHICH ONLY PERMITS THE AO TO MAK E ADDITION U/S 68 IF THE ASSESSEE COMPANY FAILS TO OFFER AN EXPLANATION TO THE SATISFACTION OF THE AO IN RESPECT OF RECEIPT OF SHARE CAPITAL WITH PREMIUM. HE ARGUED THAT SIMULTANEOUS WITH THE INSERTION OF THE PROVISO TO SECTION 68, THE LEGISLATURE HAS ALSO BROUGHT IN AN AMENDMENT TO SEC TION 56(2)(VIIB) INSERTED W.E.F. 1.4.2013 PROVIDING THAT WHERE A COM PANY, NOT BEING A COMPANY IN WHICH THE PUBLIC ARE SUBSTANTIALLY INTER ESTED, RECEIVES, IN ANY PREVIOUS YEAR, FROM ANY PERSON BEING A RESIDENT , ANY CONSIDERATION FOR ISSUE OF SHARES THAT EXCEEDS THE FACE VALUE OF SUCH SHARES, THE AGGREGATE CONSIDERATION RECEIVED FOR SUCH SHARES AS EXCEEDS THE FAIR MARKET VALUE OF THE SHARES, SHALL BE CHARGEABLE TO INCOME-TAX UNDER THE HEAD 'INCOME FROM OTHER SOURCES'. IN THE BACKDROP OF THESE ITA NO.1104/KOL/2014 (M/S SUBHALAKSHMI VANIJYA PVT. L TD.) & 18 OTHER APPEALS OF DIFFERENT ASSESSEES 23 AMENDMENTS BROUGHT IN BY THE FINANCE ACT, 2012, THE LD. AR CONTENDED THAT EXCESS SHARE PREMIUM CAN BE CHARGED TO TAX AS INCOME FROM OTHER SOURCES AND THE AO IS ENTITLED TO MAKE ADDITION U/S 68 IN RESPECT OF UNSATISFACTORY EXPLANATION GIVEN FOR THE RECEIPT OF SHARE CAPITAL WITH PREMIUM ONLY FROM THE A.Y. 2013-14. AS THE YEAR U NDER CONSIDERATION IS A.Y. 2009-10, THE LD. AR ARGUED THAT THE HANDS O F THE AO ARE TIED EITHER TO EXAMINE THE GENUINENESS OF SHARE CAPITAL WITH PREMIUM IN THE HANDS OF THE COMPANY OR TO TAX THE EXCESS SHARE PRE MIUM. IT WAS STATED THAT ONCE THE QUESTION OF ISSUE OF SHARES CANNOT BE EXAMINED IN THE HANDS OF THE ASSESSEE COMPANY, THERE CAN BE NO RATIONALE IN THE LD. CIT DIRECTING THE AO TO EXAMINE THE GENUINENESS OF SHAR E CAPITAL IN PROCEEDINGS PURSUANT TO SECTION 263. THE LD. DR OP POSED THIS CONTENTION TOOTH AND NAIL. 13.B. IN ORDER TO APPRECIATE THE RIVAL CONTENTIO NS IN THIS REGARD, LET US HAVE A LOOK AT THE PRESCRIPTION OF SECTION 68, THE RELEVANT PART OF WHICH PROVIDES THAT : ` WHERE ANY SUM IS FOUND CREDITED IN THE BOOKS OF AN ASSESSEE MAINTAINED FOR ANY PREVIOUS YEAR, AND THE ASSESSEE OFFERS NO ITA NO.1104/KOL/2014 (M/S SUBHALAKSHMI VANIJYA PVT. L TD.) & 18 OTHER APPEALS OF DIFFERENT ASSESSEES 24 EXPLANATION ABOUT THE NATURE AND SOURCE THEREOF OR THE EXPLANATION OFFERED BY HIM IS NOT, IN THE OPINION OF THE ASSESS ING OFFICER, SATISFACTORY, THE SUM SO CREDITED MAY BE CHARGED TO INCOME-TAX AS THE INCOME OF THE ASSESSEE OF THAT PREVIOUS YEAR.. TH IS SECTION HAS RECEIVED THE ATTENTION OF THE HONBLE SUPREME COURT AND ALMO ST ALL THE HIGH COURTS IN NUMEROUS CASES. IT HAS BEEN ALMOST UNANIM OUSLY HELD THAT THE BURDEN UNDER THIS SECTION IS DISCHARGED BY THE ASSE SSEE ONLY WHEN THE ASSESSEE PROVES THREE THINGS TO THE SATISFACTION OF THE AO, VIZ., IDENTITY OF THE CREDITOR, CAPACITY OF THE CREDITOR AND GENUI NENESS OF THE TRANSACTION. THE HONBLE JURISDICTIONAL HIGH COURT IN CIT VS. KORLAY TRADING CO. LTD. (1998) 232 ITR 820 (CAL) HAS HELD THAT MERE FILING OF THE INCOME-TAX FILE NUMBER OF THE CREDITORS IS NOT ENOUGH TO PROVE THE GENUINENESS OF THE CASH CREDIT. THE CREDITOR SHOULD BE IDENTIFIED. THERE SHOULD BE CREDITWORTHINESS. THERE SHOULD BE A GENUI NE TRANSACTION. IN K.M. SADHUKHAN & SONS P. LTD. VS. CIT (1999) 239 I TR 77 (CAL) , IT HAS BEEN HELD THAT THE BURDEN LIES ON THE ASSESSEE TO P ROVE THE GENUINENESS OF LOAN. THE HONBLE HIGH COURT HAS HELD THAT THE INITIAL BURDEN IS ON ITA NO.1104/KOL/2014 (M/S SUBHALAKSHMI VANIJYA PVT. L TD.) & 18 OTHER APPEALS OF DIFFERENT ASSESSEES 25 THE ASSESSEE TO PROVE THE IDENTITY OF THE CREDITOR, THE CAPACITY OF THE CREDITOR TO ADVANCE THE LOAN AND THE GENUINENESS OF THE TRANSACTION. IN CIT VS. PRECISION FINANCE P. LTD. (1994) 208 ITR 46 5 (CAL), THE TRIBUNAL DELETED THE ADDITION ON THE FOOTING THAT S INCE THE TRANSACTIONS WERE THROUGH BANK ACCOUNT, HENCE IT WAS TO BE PRESU MED THAT THOSE WERE GENUINE. SETTING ASIDE THE TRIBUNAL ORDER, THE HON BLE HIGH COURT HAS HELD THAT : `IT IS FOR THE ASSESSEE TO PROVE THE ID ENTITY OF THE CREDITORS, THEIR CREDITWORTHINESS AND THE GENUINENESS OF THE T RANSACTIONS. MERE FURNISHING OF THE PARTICULARS IS NOT ENOUGH.. SIM ILAR VIEW HAS BEEN TAKEN IN SEVERAL CASES. ON GOING THROUGH THE ABOVE JUDGMENTS, IT IS EXPLICIT THAT THE ONUS U/S 68 CAN BE SAID TO HAVE B EEN DISCHARGED ONLY WHEN THE ASSESSEE PROVES IDENTITY AND CAPACITY OF T HE CREDITOR ALONG WITH THE GENUINENESS OF TRANSACTION TO THE SATISFACTION OF THE AO. ALL THE THREE CONSTITUENTS ARE REQUIRED TO BE CUMULATIVELY SATIS FIED. IF ONE OR MORE OF THEM IS ABSENT, THEN THE AO CAN LAWFULLY MAKE ADDIT ION. 13.C. NOW, WE TAKE UP THE MAJOR CONTENTION ADVA NCED BY THE LD. AR TO THE EFFECT THAT A COMPANY ISSUING SHARES IS NOT REQ UIRED TO DISCHARGE THE ITA NO.1104/KOL/2014 (M/S SUBHALAKSHMI VANIJYA PVT. L TD.) & 18 OTHER APPEALS OF DIFFERENT ASSESSEES 26 BURDEN CAST U/S 68 IN RESPECT OF SHARE CAPITAL. THI S HAS BEEN BUTTRESSED TAKING ASSISTANCE FROM THE JUDGMENT OF THE HONBL E SUPREME COURT IN LOVELY EXPORTS (SUPRA) . IT IS NO DOUBT TRUE THAT HONBLE SUMMIT COURT HAS HELD THAT IF THE SHARE APPLICATION MONEY IS REC EIVED BY THE ASSESSEE COMPANY FROM ALLEGED BOGUS SHAREHOLDERS, WHOSE NAME S ARE GIVEN TO THE AO, THEN, THE DEPARTMENT IS FREE TO PROCEED TO REOP EN THEIR INDIVIDUAL ASSESSMENTS IN ACCORDANCE WITH THE LAW, BUT, IT CAN NOT BE REGARDED AS UNDISCLOSED INCOME OF THE ASSESSEE. 13.D. IT IS A WELL SETTLED LEGAL POSITION THAT E VERY CASE DEPENDS ON ITS OWN FACTS. EVEN A SLIGHTEST CHANGE IN THE FACTUAL SCENARIO ALTERS THE ENTIRE CONSPECTUS OF THE MATTER AND MAKES ONE CASE DISTINGUISHABLE FROM ANOTHER. THE CRUX OF THE MATTER IS THAT THE RATIO OF ANY JUDGMENT CANNOT BE SEEN DIVORCED FROM ITS FACTS. 13.E. AT THIS STAGE, IT IS RELEVANT TO MENTION THA T THE HONBLE JURISDICTIONAL HIGH COURT HAS RECENTLY IN THE CASE OF CIT VS. MAITHAN INTERNATIONAL (2015) 277 CTR 65 (CAL) DEALT WITH LOVELY EXPORTS AND ITA NO.1104/KOL/2014 (M/S SUBHALAKSHMI VANIJYA PVT. L TD.) & 18 OTHER APPEALS OF DIFFERENT ASSESSEES 27 ALSO REPRODUCED THE RELEVANT PART OF THE LOVELY EXPORTS IN PARA 25 OF ITS JUDGMENT, READING AS UNDER : - THIS REASONING MUST APPLY A FORTIORI TO LARGE SCALE SUBSCRIPTIONS TO THE SHARES OF A PUBLIC COMPANY WHERE THE LATTER MAY HAVE NO MATERIAL OTHER THAN THE APPLICATION FORMS AND BANK TRANSACTION DETAILS TO GIVE SOME INDICATION OF THE IDENTITY OF THESE SUBSCRIBERS. IT MAY NOT APPLY IN CIRCUMSTANCES WHERE THE SHARES ARE ALLOTTED DIRECTLY BY THE COMPANY /ASSESSEE OR TO CREDITORS OF THE ASSESSEE. THIS IS WHY THIS COURT HAS ADOPTED A VERY STRICT AP PROACH TO THE BURDEN BEING LAID ALMOST ENTIRELY ON AN ASSESSEE WH ICH RECEIVES A GIFT. 13.F. IN THIS CASE, THE HONBLE JURISDICTIONAL HI GH COURT APPRECIATED THE `POSSIBLE DIFFICULTY WHICH AN ASSESSEE MAY BE FACED WITH WHEN ASKED TO ESTABLISH UNIMPEACHABLE CREDITWORTHINESS OF THE SHARE SUBSCRIBERS . IT OBSERVED THAT THE THIS ASPECT HAS TO BE DECIDED ON FACTUAL MATRIX OF EACH CASE AND STRICT OR STRINGENT TEST MAY NOT BE APPLIE D TO ARMS LENGTH ANGEL INVESTORS OR NORMAL PUBLIC ISSUES.... THE SAID DOCT RINE IS APPLIED WHEN ITA NO.1104/KOL/2014 (M/S SUBHALAKSHMI VANIJYA PVT. L TD.) & 18 OTHER APPEALS OF DIFFERENT ASSESSEES 28 THERE IS EVIDENCE TO SHOW THAT ASSESSEE MAY NOT BE AWARE, COULD NOT HAVE KNOWLEDGE OR WAS UNCONCERNED AS TO THE SOURCE OF MO NEY PAID OR BELONGING TO THE THIRD PARTY. .... HOWEVER, WHEN THERE IS SURROUNDING EVIDENCE AND MATERIAL MANIFESTING AND REVEALING INV OLVEMENT OF THE ASSESSEE IN THE TRANSACTION AND THAT IT WAS NOT ENTIRELY AN ARMS LENGTH TRANSACTION, RESORT OR RELIANCE TO THE SAID DOCTRINE MAY BE COUNTER-PRODUCTIVE AND CONTRARY TO EQUITY AND JUSTICE. THE DOCTRINE I S NOT AN ELDRITCH OR A CAMOUFLAGE TO CIRCULATE ILL GO TTEN AND UNRECORDED MONEY. THEREAFTER IN PARA 25, THE HONBLE HIGH C OURT SPECIFICALLY CONSIDERED THE JUDGMENT IN THE CASE OF LOVELY EXPORTS (SUPRA). IT ALSO TOOK INTO CONSIDERATION THE JUDGMENT IN THE CASE OF CIT VS. NOVA PROMOTERS & FINLEASE P. LTD. (2012) 342 ITR 0169 (D EL) , IN WHICH IT WAS HELD THAT IN VIEW OF THE LINK BETWEEN THE ENTR Y PROVIDERS AND INCRIMINATING EVIDENCE, MERE FILING OF PAN NUMBER, ACKNOWLEDGEMENT OF INCOME TAX RETURNS OF THE ENTRY PROVIDER, BANK A CCOUNT STATEMENTS ETC. WAS NOT SUFFICIENT TO DISCHARGE THE ONUS. AFTER T HOROUGHLY EXAMINING THE LOVELY EXPORTS JUDGMENT IN THE LIGHT OF OTHER JUDGMENTS, THE HON BLE ITA NO.1104/KOL/2014 (M/S SUBHALAKSHMI VANIJYA PVT. L TD.) & 18 OTHER APPEALS OF DIFFERENT ASSESSEES 29 JURISDICTIONAL HIGH COURT HAS CONCLUDED BY HOLDING THAT: ` IN THE CASE OF A PUBLIC ISSUE, THE COMPANY CONCERNED CANNOT BE EXP ECTED TO KNOW EVERY DETAIL PERTAINING TO THE IDENTITY AS WELL AS FINANCIAL WORTH OF EACH OF ITS SUBSCRIBERS....IN THE CASE OF PRIVATE PLACEM ENT THE LEGAL REGIME WOULD NOT BE THE SAME. A DELICATE BALANCE MUST BE MAINTAINED WHILE WALKING THE TIGHTROPE OF SECTION 68 AND 69 OF THE I NCOME TAX ACT. 13.G. THE LD. AR VEHEMENTLY ARGUED THAT THIS JUD GMENT OF THE HONBLE JURISDICTIONAL HIGH COURT BE IGNORED AS THE SAME I S BASED ON CONCESSION OF THE AR APPEARING IN THAT CASE AND, HENCE, CANNOT BE TREATED AS AN AUTHORITY FOR OTHER CASES TO FOLLOW. 13.H. WE ARE TOTALLY UNIMPRESSED WITH THE SUBMISS ION ADVANCED BY THE LD. AR. IT IS TRUE THAT WHERE A CONCESSION IS MADE AND COURT SIMPLY DECIDES THE ISSUE ON THE BASIS OF SUCH CONCESSION W ITHOUT GOING INTO ITS LEGALITY, IT CAN BE SAID THAT THE JUDGMENT IS IN PERSONAM AND NOT IN REM . BUT, WHERE, DESPITE THE CONCESSION, THE COURT THOR OUGHLY ANALYSES THE FACTUAL AND LEGAL PROVISION PREVAILING IN THAT CASE AND, AFTER MAKING AN ITA NO.1104/KOL/2014 (M/S SUBHALAKSHMI VANIJYA PVT. L TD.) & 18 OTHER APPEALS OF DIFFERENT ASSESSEES 30 ELABORATE EXAMINATION, DRAWS A CONCLUSION, THEN IT CANNOT BE SAID THAT THE DECISION IS BASED ON A MERE CONCESSION. IN SUCH CI RCUMSTANCES, THE RATIO OF THE JUDGMENT APPLIES WITH FULL FORCE TO ALL THE PARTIES. THIS CONTENTION OF THE LD. AR, ERGO, FAILS. 13.I. THE HONBLE DELHI HIGH COURT IN NOVA PROMOTERS (SUPRA), WHILE DISCUSSING THE FACTUAL MATRIX IN THE CASE OF LOVELY EXPORTS (SUPRA) NOTICED THAT THE REASONING OF ACCEPTING THE GENUINE NESS OF SHARE CAPITAL, EVEN IF THE SHAREHOLDERS ARE BOGUS, MUST APPLY A FO RTIORI TO LARGE-SCALE SUBSCRIPTIONS TO THE SHARES OF A PUBLIC COMPANY WHE RE THE LATTER MAY HAVE NO MATERIAL OTHER THAN THE APPLICATION FORMS A ND BANK TRANSACTION DETAILS TO GIVE SOME INDICATION OF THE IDENTITY OF THESE SUBSCRIBERS. THE HONBLE HIGH COURT FURTHER OBSERVED THAT: IT MAY NOT APPLY IN CIRCUMSTANCES WHERE THE SHARES ARE ALLOTTED DIRECTL Y BY THE COMPANY/ASSESSEE OR TO CREDITORS OF THE ASSESSEE. 13.J. THE HONBLE DELHI HIGH COURT IN CIT VS. NAVODAYA CASTLES PVT. LTD. (2014) 367 ITR 0306 (DEL) FOLLOWING THE PRINCIPLE LAID DOWN IN NOVA PROMOTERS (SUPRA) HAS HELD THAT THE SHARE CAPITAL IN CASE OF A ITA NO.1104/KOL/2014 (M/S SUBHALAKSHMI VANIJYA PVT. L TD.) & 18 OTHER APPEALS OF DIFFERENT ASSESSEES 31 CLOSELY HELD COMPANY IS REQUIRED TO BE EXAMINED BY THE AO IN TERMS OF SECTION 68 AND THE FAILURE OF THE ASSESSEE TO SATIS FY THE AO, CALLS FOR ADDITION U/S 68. IT IS USEFUL TO MENTION THAT THE S LP FILED BY THE ASSESSEE AGAINST THIS JUDGMENT HAS BEEN DISMISSED BY THE HON BLE SUPREME COURT WHICH HAS BEEN SINCE REPORTED AS NAVODAYA CASTLES PVT. LTD. VS. CIT (2015) 230 TAXMAN 268(SC). 13.K. THE HONBLE JURISDICTIONAL HIGH COURT IN CIT VS. ACTIVE TRADERS (P) LTD. (1995) 214 ITR 583 (CAL) HAS HELD THAT THE ASSESSING OFFICER IN THE ASSESSMENT OF THE COMPANY HAS JURISDICTION TO ASK FOR THE INFORMATION FROM THE SHAREHOLDERS REGARDING THE SOU RCE OF INVESTMENT MADE IN THE COMPANY. IT SET ASIDE THE VIEW OF THE T RIBUNAL THAT THERE COULD BE NO ENQUIRY REGARDING THE SOURCE OF INVESTM ENT OF THE SHAREHOLDERS IN THE SHARES OF THE COMPANY. THEIR LO RDSHIPS OBSERVED THAT : `IF A CASH CREDIT IS SHOWN BY THE COMPANY IN ITS BOOKS OF ACCOUNTS AND IF THE SOURCE CANNOT BE EXPLAINED PROPERLY THE ITO MAY ASSESS THE SUM AS INCOME OF THE COMPANY FROM UNDISCLOSED SOURC E. ITA NO.1104/KOL/2014 (M/S SUBHALAKSHMI VANIJYA PVT. L TD.) & 18 OTHER APPEALS OF DIFFERENT ASSESSEES 32 13.L. IN MIMEC (INDIA) P. LTD. & ANR VS. DCIT & ORS. (2013) 353 ITR 0284 (CAL) ALSO, THE ASSESSEE RELIED ON THE RATIO IN THE CASE OF CIT VS. LOVELY EXPORTS PVT. LTD. FOR CONTENDING THAT IF SHARE APPLICATION MONEY WAS RECEIVED EVEN FROM BOGUS SHAREHOLDERS, THE DEPA RTMENT COULD NOT REGARD IT AS UNDISCLOSED INCOME OF THE ASSESSEE COM PANY. REPELLING SUCH CONTENTION, THE HONBLE HIGH COURT OBSERVED THAT : ` THE JUDGMENT IN COMMISSIONER OF INCOME TAX VS. LOVELY EXPORTS PVT. LTD. WAS RENDERED IN THE PARTICULAR FACTS AND CIRCUMSTANCES OF THAT C ASE. THE JUDGMENT MAY NOT LAY DOWN ANY PROPOSITION OF LAW THAT OPERATES A S A BINDING PRECEDENT ON THIS COURT.. 13.M. THE HONBLE JURISDICTIONAL HIGH COURT IN CIT VS. NIVEDAN VANIJYA NIYOJAN LTD. (2003) 263 ITR 0623 (CAL) HAS HELD THAT WHERE THE ASSESSEE-COMPANY DID NOT PRODUCE THE SUBSCRIBE RS OF ITS SHARE CAPITAL WHEN REQUIRED TO DO SO, IT FAILED TO ESTABL ISH THE IDENTITY OF SAID SUBSCRIBERS, PROVE THEIR CREDITWORTHINESS AND THE G ENUINENESS OF THE TRANSACTION AND THEREFORE, ADDITION UNDER SECTION 68 WAS JUSTIFIED. ITA NO.1104/KOL/2014 (M/S SUBHALAKSHMI VANIJYA PVT. L TD.) & 18 OTHER APPEALS OF DIFFERENT ASSESSEES 33 13.N. WE CONSIDER IT OUR DUTY TO MENTION THAT THE LD. AR HAS ALSO REFERRED TO CERTAIN JUDGMENTS RENDERED BY THE HONB LE CALCUTTA HIGH COURT IN WHICH THE RATIO OF LOVELY EXPORTS (SUPRA) HAS BEEN FOLLOWED AND ADDITIONS DELETED. 13.O. UNDER SUCH CIRCUMSTANCES THE QUESTION ARIS ES THAT IF ON ONE POINT THERE ARE CONFLICTING JUDGMENTS OF ONE HIGH COURT, THEN WHICH OF THE CONFLICTING VIEWS SHOULD BE FOLLOWED. IT CAN BE NOT ICED THAT JUDGMENT IN MAITHAN INTERNATIONAL(SUPRA) IS LATEST IN THE POINT OF TIME HAVING BEEN RENDERED ON 21.1.2015 BY TWO HONBLE JUDGES. NONE OF THE CONTRARY JUDGMENTS HAS BEEN RENDERED BY A BENCH OF MORE THAN TWO JUDGES AND SUCH JUDGMENTS ARE OLDER IN POINT OF TIME VIS--VIS MAITHAN INTERNATIONAL (SUPRA) . IN OUR CONSIDERED OPINION THE QUESTION OF THE APPLICABILITY OF WHICH OF THE CONTRARY DECISIONS B Y ONE HIGH COURT HAS BEEN FAIRLY SETTLED IN SEVERAL CASES INCLUDING THE JUDGMENT IN BHIKA RAM & ORS. VS. UNION OF INDIA (1999) 238 ITR 113 ( DEL) WHEREIN IT HAS BEEN HELD THAT A LATER JUDGMENT OF THE SAME STRENGT H OF JUDGES IS BINDING. IT IS RELEVANT TO MENTION THAT THE COUNSEL IN THAT CASE ARGUED THAT THE ITA NO.1104/KOL/2014 (M/S SUBHALAKSHMI VANIJYA PVT. L TD.) & 18 OTHER APPEALS OF DIFFERENT ASSESSEES 34 EARLIER JUDGMENT OF THE HONBLE SUPREME COURT ON TH E POINT SHOULD BE FOLLOWED AS AGAINST THE LATER JUDGMENT, BECAUSE THE EARLIER JUDGMENT WAS NOT BROUGHT TO THE NOTICE OF THE HONBLE SUPREME CO URT IN THE LATER CASE AND EVEN THE CASE WAS NOT ARGUED FROM THAT ANGLE. J ETTISONING SUCH ARGUMENT, THE HONBLE HIGH COURT HAS HELD AS UNDER : - `HOWEVER, LEARNED COUNSEL FOR THE PETITIONER RELIED ON SATINDER SINGH VS. UMRAO SINGH AIR 1961 SC 908, TO SUBMIT THAT COM PENSATION WOULD NOT BE TREATED AS INCOME. LEARNED COUNSEL FURTHER S UBMITTED THAT THE DECISION OF THE SUPREME COURT IN SATINDER SINGHS C ASE (SUPRA) WAS NOT BROUGHT TO THE NOTICE OF THE SUPREME COURT WHEN BIK RAM SINGHS CASE (SUPRA) WAS DECIDED. IT IS ALSO SUBMITTED THAT THE REASONING ON WHICH THEIR LORDSHIPS HAVE PROCEEDED IN THE CASE OF SATIN DER SINGH (SUPRA) WAS ALSO NOT ARGUED BEFORE THE SUPREME COURT IN BIK RAM SINGHS CASE (SUPRA). NOT ONLY ARE WE NOT SATISFIED ABOUT THE CO RRECTNESS OF THE SUBMISSION SO MADE, WE ARE ALSO OF THE OPINION THAT SUCH A PLEA IS NOT OPEN FOR CONSIDERATION BY US AND BIKRAM SINGHS CAS E (SUPRA), BEING A LATER PRONOUNCEMENT OF THE SUPREME COURT BY A BENCH OF CO-EQUAL STRENGTH, IT IS BINDING ON US . 13.P. SIMILAR VIEW HAS BEEN TAKEN BY THE FULL BEN CH JUDGMENT OF THE HONBLE GUJARAT HIGH COURT IN GUJARAT HOUSING BOARD VS. VAGAJI BHAI LAXMAN BHAI AIR 1986 GUJ 81 (FB) . AS SUCH, WE ARE DISINCLINED TO IGNORE THIS RULE OF PRECEDENCE OF JUDGMENTS AND HOL D THAT THE LATER JUDGMENT IN THE CASE OF MAITHAN INTERNATIONAL (SUPRA) WITH EQUAL ITA NO.1104/KOL/2014 (M/S SUBHALAKSHMI VANIJYA PVT. L TD.) & 18 OTHER APPEALS OF DIFFERENT ASSESSEES 35 STRENGTH OF JUDGES IS BINDING ON US. 13.Q. THE LD. COUNSEL THEN SUBMITTED THAT THE JU DGMENT IN THE CASE OF MAITHAN INTERNATIONAL (SUPRA) CANNOT BE CONSIDERED AS A BINDING PRECEDENT QUA THE ADDITION U/S 68 WITH REFERENCE TO SHARE CAPITA L BECAUSE THE QUESTION BEFORE THE HONBLE COURT WAS A BOUT THE GENUINENESS OF THE LOAN CREDITORS AND NOT THAT OF S UBSCRIBERS TO THE SHARE CAPITAL. IT WAS SUBMITTED THAT THE DISCUSSION MADE IN THIS JUDGMENT ABOUT THE SHARE CAPITAL AND THE ATTRACTABILITY OF S ECTION 68 IS SIMPLY O BITER DICTA AND CANNOT BE CONSTRUED AS RATIO DECIDENDI . 13.R. WE ARE NOT PERSUADED BY THE ARGUMENT PUT FORTH BY THE LD. AR. THERE IS NO DOUBT THAT THE QUESTION BEFORE THE HON BLE HIGH COURT WAS IN RELATION TO LOAN CREDITORS. HOWEVER, THE FACT R EMAINS THAT THEIR LORDSHIPS HAVE LAID DOWN THAT SECTION 68 CAN BE INV OKED WHEN THE THREE INGREDIENTS OF SECTION 68 ARE NOT SATISFIED IN RELA TION TO SHARE CAPITAL AS WELL. THERE IS AN ELABORATE DISCUSSION ON THIS ISS UE STARTING FROM PARA 24. THEIR LORDSHIPS HAVE NOT ONLY CONSIDERED THE J UDGMENT IN THE CASE OF LOVELY EXPORTS (SUPRA), BUT ALSO SEVERAL OTHER JUDGMENTS INCLUDING ITA NO.1104/KOL/2014 (M/S SUBHALAKSHMI VANIJYA PVT. L TD.) & 18 OTHER APPEALS OF DIFFERENT ASSESSEES 36 NOVA PROMOTERS (SUPRA) , STELLAR INVESTMENT, SOFIA FINANCE, NIPUN BUILDERS AND DEVELOPERS, (2013) 350 ITR 407 (DEL) ETC., ALL OF WHICH DEAL WITH THE APPLICABILITY OF SECTION 68 IN RESPEC T OF SHARE CAPITAL. IN VIEW OF SUCH A THREADBARE ANALYSIS OF THE ISSUE COU PLED WITH THE FACT THAT UNSECURED LOANS AND SHARE CAPITAL HAVE BEEN KEPT BY THE HONBLE HIGH COURT ON THE SAME PEDESTAL FOR THE PURPOSES OF SECT ION 68, IT IS DIFFICULT FOR US TO ACCEPT THE CONTENTION THAT THE ENTIRE DIS CUSSION CONCERNING THE ATTRACTABILITY OF SECTION 68 ON SHARE CAPITAL/PREMI UM IN THE CASE OF A CLOSELY HELD COMPANIES IS OBITER DICTA AND HENCE BE IGNORED. 13.S. BE THAT AS IT MAY, EVEN OBITER OF THE JURISDICTIONAL HIGH COURT CANNOT BE HELD AS NON-BINDING. THE HONBLE BOMBAY H IGH COURT IN TATA IRON AND STEEL COMPANY LTD. VS. D.V. BAPAT , ITO (1 975) 101 ITR 292 (DEL) , HAS HELD THAT OBITER DICTA OF SUPREME COURT IS BI NDING ON ALL HIGH COURTS. WHEN THE OBITER DICTA OF SUPREME COURT IS BINDING ON ALL HIGH COURTS, WE FAIL TO APPRECIATE AS TO HOW OBITER DICT A OF THE HONBLE JURISDICTIONAL HIGH COURT CAN BE CLAIMED AS NOT BIN DING ON ALL THE ITA NO.1104/KOL/2014 (M/S SUBHALAKSHMI VANIJYA PVT. L TD.) & 18 OTHER APPEALS OF DIFFERENT ASSESSEES 37 AUTHORITIES FALLING WITHIN ITS JURISDICTION. WE, T HEREFORE, REFUSE TO ACCEPT THIS CONTENTION. 13.T. ON AN OVERVIEW OF THE LEGAL POSITION FLOWING FROM THE ABOVE DISCUSSION IT BECOMES EVIDENT THAT IN CASE OF A CL OSELY HELD COMPANY WHERE THE SHARES ARE ISSUED TO THE FAMILY MEMBERS O R CLOSE FRIENDS/RELATIVES, THE BURDEN OF PROOF RESTS ON THE COMPANY TO PROPERLY EXPLAIN THE IDENTITY AND CAPACITY OF SHAREHOLDERS A LONG WITH THE GENUINENESS OF THE TRANSACTIONS. EX CONSEQUENTI, THE ARGUMENT OF THE LD. AR THAT THE ASSESSEE WAS NOT OBLIGED TO EXPLAIN THE GENUINENESS OF SHARE CAPITAL AFTER HAVING FURNISHED PRELIMINARY DETAILS ABOUT THE SHAREHOLDERS ETC., IS NOT CAPABLE OF ACCEPTANCE AND HENCE REJEC TED. WE HOLD THAT IN ALL CASES, WHERE THE ASSESSEE FAILS TO CUMULATIVELY PROVE TO THE SATISFACTION OF THE AO, THE IDENTITY AND CAPACITY O F THE SHAREHOLDERS ALONG WITH THE GENUINENESS OF THE TRANSACTIONS THE RE CAN BE NO ESCAPE FROM SECTION 68. 13.U. NOW WE ESPOUSE THE NEXT LEG OF THE ARGUMENT S OF THE LD. AR THAT THE INSERTION OF PROVISO TO SECTION 68 BY THE FINAN CE ACT 2012 W.E.F. ITA NO.1104/KOL/2014 (M/S SUBHALAKSHMI VANIJYA PVT. L TD.) & 18 OTHER APPEALS OF DIFFERENT ASSESSEES 38 1.4.2013 EMPOWERING THE AO TO EXAMINE THE GENUINENE SS OF THE SHARE CAPITAL IN THE CASE OF A COMPANY IN WHICH PUBLIC AR E NOT SUBSTANTIALLY INTERESTED, IS PROSPECTIVE AND, HENCE, THE CIT IN T HE YEAR UNDER CONSIDERATION QUESTION WAS NOT RIGHT IN DIRECTING THE AO TO EXAMINE THE GENUINENESS OF SHARE CAPITAL WITH PREMIUM. ON THE O THER HAND, THE LD. DR ADVOCATED THE RETROSPECTIVE OPERATION OF THIS AM ENDMENT. 13.V. IN ORDER TO EVALUATE THE RIVAL THE CONTENT IONS ON THIS ISSUE, WE CONSIDER IT APT TO REPRODUCE THE RELEVANT PART OF T HE PROVISO TO SECTION, WHICH READS AS UNDER : - `PROVIDED THAT WHERE THE ASSESSEE IS A COMPANY, (NOT BEING A COMPANY IN WHICH THE PUBLIC ARE SUBSTANTIALLY INTERESTED) A ND THE SUM SO CREDITED CONSISTS OF SHARE APPLICATION MONEY, SHARE CAPITAL, SHARE PREMIUM OR ANY SUCH AMOUNT BY WHATEVER NAME CALLED, ANY EXPLAN ATION OFFERED BY SUCH ASSESSEE-COMPANY SHALL BE DEEMED TO BE NOT SAT ISFACTORY, UNLESS ( A ) THE PERSON, BEING A RESIDENT IN WHOSE NAME SUCH CREDIT IS RECORDED IN THE BOOKS OF SUCH COMPANY ALSO OFFERS AN EXPLANA TION ABOUT THE NATURE AND SOURCE OF SUCH SUM SO CREDITED; AND ( B ) SUCH EXPLANATION IN THE OPINION OF THE ASSESSING OFFICER AFORESAID HAS BEEN FOUND TO BE SATISFACTORY: PROVIDED FURTHER THAT NOTHING CONTAINED IN THE FIRST PROVISO SHALL A PPLY IF THE PERSON, IN WHOSE NAME THE SUM REFERRED TO TH EREIN IS RECORDED, IS A VENTURE CAPITAL FUND OR A VENTURE CAPITAL COMPANY A S REFERRED TO IN CLAUSE (23FB) OF SECTION 10 . ITA NO.1104/KOL/2014 (M/S SUBHALAKSHMI VANIJYA PVT. L TD.) & 18 OTHER APPEALS OF DIFFERENT ASSESSEES 39 13.W. AS PER THIS PROVISO WHERE ANY SHARE CAPITAL ETC. IS CREDITED IN THE CASE OF CLOSELY HELD COMPANY, THE EXPLANATION GIVEN BY SUCH COMPANY SHALL BE DEEMED TO BE NOT SATISFACTORY, UNLESS THE RESIDENT SHAREHOLDER OFFERS AN EXPLANATION ABOUT THE NATURE AND SOURCE O F SUCH SUM SO CREDITED AND SUCH EXPLANATION IS FOUND TO BE SATISF ACTORY BY THE AO. THE ESSENCE OF THIS AMENDMENT IS THAT A CLOSELY HELD CO MPANY IS REQUIRED TO SATISFY THE AO ABOUT THE SHARE CAPITAL ETC. ISSUED BY IT, IN THE ABSENCE OF WHICH, AN ADDITION U/S 68 CAN BE MADE IN THE HANDS OF THE COMPANY. IF WE ACCEPT THE AMENDMENT TO BE PROSPECTIVE, THEN IT WOULD MEAN PRECLUDING THE AO FROM EXAMINING THE GENUINENESS OF TRANSACTIONS OF RECEIPT OF SHARE CAPITAL WITH PREMIUM UNDER CONSIDE RATION AND HENCE PROHIBITING HIM FROM MAKING ANY ADDITION U/S 68 NOT WITHSTANDING THE SAME BEING NON-GENUINE. IN THE OPPUGNATION, IF THE AMENDMENT IS HELD TO BE PROSPECTIVE, THEN IT WOULD MEAN THAT THE AO W OULD HAVE ALL THE POWERS TO EXAMINE THE GENUINENESS OF SHARE CAPITAL AND SHARE PREMIUM RECEIVED BY THE ASSESSEE COMPANY ON THE TOUCHSTONE OF SECTION 68. IF THE ASSESSEE FAILS TO SATISFY HIM ON THE IDENTITY AND C APACITY OF THE ITA NO.1104/KOL/2014 (M/S SUBHALAKSHMI VANIJYA PVT. L TD.) & 18 OTHER APPEALS OF DIFFERENT ASSESSEES 40 SUBSCRIBERS AND GENUINENESS OF TRANSACTIONS, THEN A DDITION WILL BE CALLED FOR U/S 68 OF THE ACT. WE, THEREFORE, FIRSTLY NEE D TO DECIDE AS TO WHETHER THE AMENDMENT TO SECTION 68 BY WAY OF INSERTION OF PROVISO IS RETROSPECTIVE OR PROSPECTIVE? 13.X. IT IS SETTLED RULE OF CONSTRUCTION THAT EV ERY STATUTE IS PRIMA FACIE PROSPECTIVE UNLESS IT IS EXPRESSLY OR BY NECESSARY IMPLICATION MADE TO HAVE RETROSPECTIVE OPERATION. ORDINARILY THE COURTS ARE REQUIRED TO GATHER THE INTENTION OF THE LEGISLATURE FROM THE OVERT LAN GUAGE OF THE PROVISION AS TO WHETHER IT HAS BEEN MADE PROSPECTIVE OR RETRO SPECTIVE, AND IF RETROSPECTIVE, THEN FROM WHICH DATE. HOWEVER, SOME TIMES WHAT HAPPENS IS THAT THE SUBSTANTIVE PROVISION, AS ORIGINALLY EN ACTED OR LATER AMENDED, FAILS TO CLARIFY THE INTENTION OF THE LEGISLATURE. IN SUCH A SITUATION IF SUBSEQUENTLY SOME AMENDMENT IS CARRIED OUT TO CLARI FY THE REAL INTENT, SUCH AMENDMENT HAS TO BE CONSIDERED AS RETROSPECTIV E FROM THE DATE WHEN THE EARLIER PROVISION WAS MADE EFFECTIVE. SUCH CLARIFICATORY OR EXPLANATORY AMENDMENT IS DECLARATORY. AS THE LATER AMENDMENT CLARIFIES THE REAL INTENT AND DECLARES THE POSITION AS WAS OR IGINALLY INTENDED, IT ITA NO.1104/KOL/2014 (M/S SUBHALAKSHMI VANIJYA PVT. L TD.) & 18 OTHER APPEALS OF DIFFERENT ASSESSEES 41 TAKES RETROACTIVE EFFECT FROM THE DATE WHEN THE ORI GINAL PROVISION WAS MADE EFFECTIVE. NORMALLY SUCH CLARIFICATORY AMENDME NT IS MADE RETROSPECTIVELY EFFECTIVE FROM THE EARLIER DATE. IT MAY ALSO HAPPEN THAT THE CLARIFICATORY OR EXPLANATORY PROVISION INTRODUC ED LATER TO DEPICT THE REAL INTENTION OF THE LEGISLATURE IS NOT SPECIFIC ALLY MADE RETROSPECTIVE BY THE STATUTE. NOTWITHSTANDING THE FACT THAT SUCH AME NDMENT TO THE SUBSTANTIVE PROVISION HAS BEEN GIVEN PROSPECTIVE EF FECT, THE JUDICIAL OR QUASI JUDICIAL AUTHORITIES, ON A CHALLENGE MADE TO IT, CAN JUSTIFIABLY HOLD SUCH AMENDMENT TO BE RETROSPECTIVE. THE JUSTIFICATI ON BEHIND GIVING RETROSPECTIVE EFFECT TO SUCH AMENDMENT IS TO APPLY THE REAL INTENTION OF THE LEGISLATURE FROM THE DATE SUCH PROVISION WAS IN ITIALLY INTRODUCED. THE INTENTION OF THE LEGISLATURE WHILE INTRODUCING TH E PROVISION IS GATHERED, INTER ALIA , FROM THE FINANCE BILL, MEMORANDUM EXPLAINING THE PROVISION OF THE FINANCE BILL ETC. 13.Y. THE FACTS OF CIT VS. GOLD COIN HEALTH FOOD (P.) LTD. (2008) 304 ITR 308 (SC) ARE THAT THE FINANCE ACT, 2002 AMENDED EXPLANATION 4 TO SECTION 271(1)(C) WITH EFFECT FROM 01.04.2003 PROVI DING THAT THE PENALTY ITA NO.1104/KOL/2014 (M/S SUBHALAKSHMI VANIJYA PVT. L TD.) & 18 OTHER APPEALS OF DIFFERENT ASSESSEES 42 WOULD BE IMPOSED EVEN IF THE RETURNED INCOME IS LOS S. IN THE CASE OF VIRTUAL SOFT SYSTEMS LTD. VS. CIT (2007) 289 ITR 83 (SC) (A BENCH COMPRISING OF TWO HONBLE JUDGES) IT WAS HELD THAT PRIOR TO THE AMENDMENT WITH EFFECT FROM 1ST APRIL, 2003 PENALTY FOR CONCEALMENT OF INCOME COULD NOT BE LEVIED IN THE ABSENCE OF ANY PO SITIVE INCOME. DOUBT WAS EXPRESSED OVER THE CORRECTNESS OF THIS VIEW BY A SUBSEQUENT BENCH. THEREAFTER IN THE CASE OF GOLD COIN HEALTH FOOD P. LTD. (SUPRA), A BENCH OF THREE HONBLE JUDGES OVERRULED THE JUDGMENT IN T HE CASE OF VIRTUAL SOFT SYSTEMS LTD. (SUPRA) BY HOLDING THAT EXPLANATION 4 TO SECTION 271(1)(C)(III) REGARDING THE IMPOSITION OF PENALTY, EVEN IF THERE IS A LOSS, IS CLARIFICATORY AND NOT SUBSTANTIVE. IT WAS HELD T O BE APPLYING EVEN TO THE ASSESSMENT YEARS PRIOR TO 1ST APRIL, 2003, BEI NG THE DATE FROM WHICH IT WAS BROUGHT INTO FORCE. THUS, IT CAN BE EASILY NOTICED THAT THE RETROSPECTIVE EFFECT TO THE AMENDMENT TO EXPLANATIO N 4 BY THE FINANCE ACT, 2002 HAS BEEN GIVEN BY HOLDING THAT THE POSITI ON EVEN ANTERIOR TO SUCH AMENDMENT WAS THE SAME INASMUCH AS THE PENALTY WAS IMPOSABLE EVEN IN THE CASE OF LOSS. THE INTENTION OF THE LEGI SLATURE WAS FOUND TO BE ITA NO.1104/KOL/2014 (M/S SUBHALAKSHMI VANIJYA PVT. L TD.) & 18 OTHER APPEALS OF DIFFERENT ASSESSEES 43 IMPOSING PENALTY IN ALL SUCH CASES EVEN PRIOR TO TH E AMENDMENT AND THAT IS HOW THIS AMENDMENT WAS HELD TO BE CLARIFICATORY AND THEREFORE, RETROSPECTIVE. 13.Z. SIMILAR IS THE POSITION IN THE CASE OF CIT VS. KANJI SHIVJI AND CO. (2000) 242 ITR 124 (SC) . EXPLANATION 2 TO SECTION 40(B) WAS INTRODUCED WITH EFFECT FROM 1ST APRIL, 1985 PROVIDING THAT WHE RE AN INDIVIDUAL IS A PARTNER IN A FIRM OTHERWISE THAN AS PARTNER IN REPR ESENTATIVE CAPACITY, INTEREST PAID BY THE FIRM TO SUCH INDIVIDUAL SHALL NOT BE TAKEN INTO ACCOUNT FOR THE PURPOSES OF CLAUSE (B) TO SECTION 4 0. THE HONBLE SUPREME COURT IN THE CASE OF BRIJ MOHAN DAS LAXMAN DAS VS. CIT (1997) 223 ITR 825 (SC) HELD THIS INSERTION TO BE DECLARATORY IN NATURE AND HENCE RETROSPECTIVE. IN THIS CASE IT WAS HELD T HAT THE INTEREST PAID BY THE FIRM TO A PARTNER ON HIS INDIVIDUAL DEPOSITS IS NOT HIT BY SECTION 40(B), IF THE PERSON IS A PARTNER NOT IN HIS INDIVIDUAL CA PACITY BUT AS REPRESENTING HUF. THE SAME VIEW WAS TAKEN IN SUWALAL ANANDILAL JAIN VS. CIT (1997) 224 ITR 753 (SC). HOWEVER IN RASHIK LAL AND CO. VS. CIT (1998) 229 ITR 458 (SC) , SOMEWHAT CONTRARY VIEW WAS EXPRESSED. ITA NO.1104/KOL/2014 (M/S SUBHALAKSHMI VANIJYA PVT. L TD.) & 18 OTHER APPEALS OF DIFFERENT ASSESSEES 44 THAT IS HOW THE MATTER CAME UP BEFORE THE LARGER BE NCH OF THE HONBLE SUPREME COURT IN KANJI SHIVJI AND CO. (SUPRA) . IN THIS CASE EXPLANATION 2 TO SECTION 40(B) HAS BEEN HELD AS DECLARATORY AND HENCE RETROSPECTIVE IN OPERATION BY AFFIRMING THE JUDGMENTS IN THE CASE S OF BRIJ MOHAN DAS LAXMAN DAS (SUPRA) AND SUWALAL ANANDILAL JAIN (SUPRA) . 13.AA. A SURVEY OF THE ABOVE JUDGMENTS MAKES IT PA TENT THAT ANY AMENDMENT TO THE SUBSTANTIVE PROVISION WHICH IS AIM ED AT CLARIFYING THE EXISTING POSITION OR REMOVING UNINTENDED CONSEQUENC ES TO MAKE THE PROVISION WORKABLE HAS TO BE TREATED AS RETROSPECTI VE NOTWITHSTANDING THE FACT THAT THE AMENDMENT HAS BEEN GIVEN EFFECT PROSP ECTIVELY. IN OUR CONSIDERED OPINION THE BORDER LINE BETWEEN A SUBSTA NTIVE PROVISION HAVING RETROSPECTIVE OR PROSPECTIVE EFFECT, IS QUIT E PROMINENT. ONE NEEDS TO APPRECIATE THE NATURE OF THE ORIGINAL PROVISION IN CONJUNCTION WITH THE AMENDMENT. ONCE A PROVISION HAS BEEN GIVEN RETROSP ECTIVE EFFECT BY THE LEGISLATURE, IT SHALL CONTINUE TO BE RETROSPECTIVE. IF ON THE OTHER HAND, IF THE STATUTE DOES NOT AMEND IT RETROSPECTIVELY, THEN ONE HAS TO DIG OUT THE INTENTION OF THE PARLIAMENT AT THE TIME WHEN THE OR IGINAL PROVISION WAS ITA NO.1104/KOL/2014 (M/S SUBHALAKSHMI VANIJYA PVT. L TD.) & 18 OTHER APPEALS OF DIFFERENT ASSESSEES 45 INCORPORATED AND ALSO THE NEW AMENDMENT. IF THE L ATER AMENDMENT SIMPLY CLARIFIES THE INTENTION OF THE ORIGINAL PROV ISION, THEN IT WILL ALWAYS BE CONSIDERED AS RETROSPECTIVE. LIKE THE CAS E OF GOLD COIN HEALTH FOOD P. LTD. (SUPRA) IN WHICH THE HONBLE SUPREME COURT HELD THAT THE AMENDMENT TO EXPLANATION 4 TO SECTION 271( 1)(C)(III) SIMPLY CLARIFIED THE POSITION WHICH WAS EXISTING SINCE INC EPTION OF THE PROVISION THAT THE PENALTY IS LEVIABLE ON CONCEALMENT IRRESPE CTIVE OF THE FACT WHETHER ULTIMATELY ASSESSED INCOME IS POSITIVE OR N EGATIVE. SIMILARLY IN THE CASE OF KANJI SHIVJI AND CO. (SUPRA) , THE HONBLE APEX COURT HELD THAT THE PURPOSE OF EXPLANATION 2 TO SECTION 40(B) WAS SIMPLY TO CLARIFY THAT THE INCOME-TAX ACT RECOGNIZES INDIVIDUAL STATU ES OF A PERSON AS DIFFERENT FROM HIS REPRESENTATIVE CAPACITY. THIS EX PLANATION DID NOT BRING IN A NEW PROVISION BUT CLARIFIED THAT THE POS ITION WAS SO SINCE THE INTRODUCTION OF THE PROVISION ITSELF. IN THIS CLASS OF CLARIFICATORY OR EXPLANATORY AMENDMENTS TO THE SUBSTANTIVE PROVISION S, THE OBJECT IS ALWAYS TO CLARIFY THE INTENTION OF THE LEGISLATURE AS IT WAS THERE AT THE TIME OF INSERTION OF THE ORIGINAL PROVISION. THAT I S THE REASON FOR WHICH ITA NO.1104/KOL/2014 (M/S SUBHALAKSHMI VANIJYA PVT. L TD.) & 18 OTHER APPEALS OF DIFFERENT ASSESSEES 46 THE CLARIFICATORY AMENDMENTS ARE ALWAYS RETROSPECTI VE IRRESPECTIVE OF THE DATE FROM WHICH EFFECT HAS BEEN GIVEN TO THEM BY TH E LEGISLATURE. 13.AB. ARMED WITH THE ABOVE UNDERSTANDING OF THE RETROSPECTIVE OR PROSPECTIVE EFFECT, LET US ANALYZE WHETHER OR NOT T HE INSERTION OF PROVISO TO SECTION 68 IS CLARIFICATORY? WE HAVE NOTED ABO VE THAT FOR RULING OUT THE APPLICATION OF SECTION 68, THE ASSESSEE MUST SA TISFY THE AO AS TO THE IDENTITY AND CAPACITY OF THE CREDITOR IN ADDITION T O THE GENUINENESS OF TRANSACTION. WHEN WE ADVERT TO THE LANGUAGE OF SEC TION 68, IT TRANSPIRES THAT IT REFERS TO ` ANY SUM CREDITED IN THE BOOKS OF AN ASSESSEE MAINTAINED FOR ANY PREVIOUS YEAR. THE EXPRESSION `A NY SUM CREDITED HAS NOT BEEN SPECIFICALLY DEFINED IN THE PROVISION. THU S, IT WOULD EXTEND TO ALL THE AMOUNTS CREDITED IN THE BOOKS OF ACCOUNT. A SUM CAN BE CREDITED IN THE BOOKS OF ACCOUNT, WHICH WOULD INVARIABLY EIT HER FIND ITS PLACE EITHER ON THE INCOME SIDE OF THE PROFIT AND LOSS AC COUNT OR IN THE LIABILITY SIDE OF THE BALANCE SHEET. ITEMS CREDITED TO THE PR OFIT AND LOSS ACCOUNT ARE THEMSELVES INCOME AND HENCE THERE CAN BE NO REA SON TO MAKE ADDITION ONCE AGAIN FOR THEM. ITEMS APPEARING ON T HE LIABILITY SIDE OF THE ITA NO.1104/KOL/2014 (M/S SUBHALAKSHMI VANIJYA PVT. L TD.) & 18 OTHER APPEALS OF DIFFERENT ASSESSEES 47 BALANCE SHEET CAN BE LOANS OR SHARE CAPITAL ETC. ON CE THERE IS SPECIFIC REFERENCE IN SECTION 68 FOR APPLYING IT TO `ANY SUM CREDITED, THERE CAN BE NO REASON TO RESTRICT ITS APPLICATION ONLY TO `LOAN S AND NOT TO `SHARE CAPITAL. THE BURDEN OF PROOF UNDER 68 CAN BE NO DI FFERENT IN RESPECT OF ISSUE OF SHARE CAPITAL BY CLOSELY HELD COMPANIES VIS--VIS LOANS OR GIFTS. THE HONBLE JURISDICTIONAL HIGH COURT IN MAITHAN INTERNATIONAL (SUPRA) , ACTIVE TRADERS (SUPRA), MIMEC (INDIA) P. LTD. (SUPRA) AND NIVEDAN VANIJYA NIYOJAN LTD. (SUPRA) HAS SPECIFICALLY HELD THAT THE ABOVE THREE INGREDIENTS ARE REQUIRED TO BE SATISFIED EVEN IN CA SE OF ISSUE OF SHARE CAPITAL BY A CLOSELY HELD COMPANY. FIRST TWO OUT O F THE ABOVE FOUR JUDGMENTS HAVE CONSIDERED THE JUDGMENT IN THE CASE OF LOVELY EXPORTS . IT SHOWS THAT THE INTENTION OF THE LEGISLATURE, AS INTERPRETED BY THE HONBLE JURISDICTIONAL HIGH COURT, IS ALWAYS TO CA ST DUTY ON THE ASSESSEE TO PROVE THE SATISFACTION OF THE THREE INGREDIENTS IN CASE OF TRANSACTION OF ISSUE OF SHARE CAPITAL BY A CLOSELY HELD COMPANY IN THE SAME WAY AS IS IN THE CASE OF TRANSACTION OF LOANS. ITA NO.1104/KOL/2014 (M/S SUBHALAKSHMI VANIJYA PVT. L TD.) & 18 OTHER APPEALS OF DIFFERENT ASSESSEES 48 13.AC. AT THIS JUNCTURE, IT WOULD BE RELEVANT TO NOTE THE RELEVANT PART OF THE MEMORANDUM EXPLAINING THE PROVISIONS OF THE FIN ANCE BILL, 2012, WHICH IS AS UNDER : - SECTION 68 OF THE ACT PROVIDES THAT IF ANY SUM IS FOUND CREDITED IN THE BOOKS OF AN ASSESSEE AND SUCH ASSESSEE EITHER (I) DOES NOT OFFER ANY EXPLANATION ABOUT NATURE AND SOURCE OF MONEY ; OR (II) THE EXPLANATION OFFERED BY THE ASSESSEE IS FOU ND TO BE NOT SATISFACTORY BY THE ASSESSING OFFICER, THEN, SUCH AMOUNT CAN BE TAXED AS INCOME OF THE ASS ESSEE. THE ONUS OF SATISFACTORILY EXPLAINING SUCH CREDITS REMAINS ON THE PERSON IN WHOSE BOOKS SUCH SUM IS CREDITED. IF SUCH PERSON FAILS TO OFFER AN EXPLANATION OR THE EXPLANATION IS NOT FOUND TO BE S ATISFACTORY THEN THE SUM IS ADDED TO THE TOTAL INCOME OF THE PERSON. CERTAIN JUDICIAL PRONOUNCEMENTS HAVE CREATED DOUBTS ABOUT THE ONUS O F PROOF AND THE REQUIREMENTS OF THIS SECTION, PARTICULARLY, IN CASE S WHERE THE SUM WHICH IS CREDITED AS SHARE CAPITAL, SHARE PREMIUM ETC. JUDICIAL PRONOUNCEMENTS, WHILE RECOGNIZING THAT THE PERNICIOUS PRACTICE OF CONVERSION OF UNACCOUNTED MONEY THROUGH MASQUERA DE OF INVESTMENT IN THE SHARE CAPITAL OF A COMPANY NEEDS TO BE PREVENTED, HAVE ADVISED A BALANCE TO BE MAINTAINED REGARDING O NUS OF PROOF TO BE PLACED ON THE COMPANY. THE COURTS HAVE DRAWN A DIST INCTION AND EMPHASIZED THAT IN CASE OF PRIVATE PLACEMENT OF SHA RES THE LEGAL REGIME SHOULD BE DIFFERENT FROM THAT WHICH IS FOLLOWED IN CASE OF A COMPANY SEEKING SHARE CAPITAL FROM THE PUBLIC AT LARGE. IN THE CASE OF CLOSELY HELD COMPANIES, INVESTMENTS ARE MADE BY KNOWN ITA NO.1104/KOL/2014 (M/S SUBHALAKSHMI VANIJYA PVT. L TD.) & 18 OTHER APPEALS OF DIFFERENT ASSESSEES 49 PERSONS. THEREFORE, A HIGHER ONUS IS REQUIRED TO BE PLACED ON SUCH COMPANIES BESIDES THE GENERAL ONUS TO ESTABLISH IDE NTITY AND CREDIT WORTHINESS OF CREDITOR AND GENUINENESS OF TRANSACTI ON. THIS ADDITIONAL ONUS, NEEDS TO BE PLACED ON SUCH COMPANIES TO ALSO PROVE THE SOURCE OF MONEY IN THE HANDS OF SUCH SHAREHOLDER OR PERSONS M AKING PAYMENT TOWARDS ISSUE OF SHARES BEFORE SUCH SUM IS ACCEPTED AS GENUINE CREDIT. IF THE COMPANY FAILS TO DISCHARGE THE ADDITIONAL ON US, THE SUM SHALL BE TREATED AS INCOME OF THE COMPANY AND ADDED TO ITS I NCOME. IT IS, THEREFORE, PROPOSED TO AMEND SECTION 68 OF T HE ACT TO PROVIDE THAT THE NATURE AND SOURCE OF ANY SUM CREDITED, AS SHARE CAPITAL, SHARE PREMIUM, ETC., IN THE BOOKS OF A CLOSELY HELD COMPA NY SHALL BE TREATED AS EXPLAINED ONLY IF THE SOURCE OF FUNDS IS ALSO EX PLAINED BY THE ASSESSEE-COMPANY IN THE HANDS OF THE RESIDENT-SHARE HOLDER. HOWEVER, EVEN IN THE CASE OF CLOSELY HELD COMPANIES, IT IS P ROPOSED THAT THIS ADDITIONAL ONUS OF SATISFACTORILY EXPLAINING THE SO URCE IN THE HANDS OF THE SHAREHOLDER, WOULD NOT APPLY IF THE SHAREHOLDER IS A WELL REGULATED ENTITY, I.E., A VENTURE CAPITAL FUND, VENTURE CAPIT AL COMPANY REGISTERED WITH THE SECURITIES AND EXCHANGE BOARD O F INDIA(SEBI). THIS AMENDMENT WILL TAKE EFFECT FROM 1ST APRIL, 201 3 AND WILL, ACCORDINGLY, APPLY IN RELATION TO THE ASSESSMENT YE AR 2013-14 AND SUBSEQUENT YEARS. 13.AD. A CAREFUL PERUSAL OF THE FIRST PARA OF TH E MEMORANDUM BRINGS OUT THAT THE ONUS OF SATISFACTORILY EXPLAINING ISS UE OF SHARE CAPITAL WITH PREMIUM ETC. BY A CLOSELY HELD COMPANY IS ON THE CO MPANY. IN THE NEXT PARA, IT HAS BEEN CLARIFIED THAT : ` CERTAIN JUDICIAL PRONOUNCEMENTS HAVE CREATED DOUBTS ABOUT THE ONUS OF PROOF AND THE REQU IREMENTS OF THIS SECTION, PARTICULARLY, IN CASES WHERE THE SUM WHICH IS CREDITED AS SHARE ITA NO.1104/KOL/2014 (M/S SUBHALAKSHMI VANIJYA PVT. L TD.) & 18 OTHER APPEALS OF DIFFERENT ASSESSEES 50 CAPITAL, SHARE PREMIUM, ETC . NEXT PARA RECOGNIZES THAT JUDICIAL PRONOUNCEMENTS, WHILE CONSIDERING THAT THE PERNICIO US PRACTICE OF CONVERSION OF UNACCOUNTED MONEY THROUGH MASQUERADE OF INVESTMENT IN THE SHARE CAPITAL OF A COMPANY NEEDS TO BE PREVENTE D, HAVE ADVISED A BALANCE TO BE MAINTAINED REGARDING ONUS OF PROOF TO BE PLACED ON THE COMPANY. THE COURTS HAVE DRAWN A DISTINCTION AND EMPHASIZED THAT IN CASE OF PRIVATE PLACEMENT OF SHARES THE LEGAL REGIM E SHOULD BE DIFFERENT FROM THAT WHICH IS FOLLOWED IN CASE OF A COMPANY SE EKING SHARE CAPITAL FROM THE PUBLIC AT LARGE. AFTER GOING THROUGH THE ABOVE PARTS OF THE MEMORANDUM EXPLAINING PROVISIONS OF THE FINANCE BIL L, THERE REMAINS NO DOUBT WHATSOEVER THAT THE ONUS HAS ALWAYS BEEN O N THE CLOSELY HELD COMPANIES TO PROVE THE ISSUE OF SHARE CAPITAL ETC. BY THE COMPANY IN TERMS OF SECTION 68. AN ANALYSIS OF THE ABOVE DISC USSED JUDGMENTS, INCLUDING FOUR FROM THE HONBLE JURISDICTIONAL HIGH COURT, REVEALS THAT SECTION 68 HAS BEEN UNDERSTOOD AS CASTING OBLIGATIO N ON THE CLOSELY HELD COMPANIES TO EXPLAIN THE AMOUNT OF SHARE CAPITAL ET C. CREDITED IN ITS BOOKS OF ACCOUNT. WHEN WE READ THE MEMORANDUM EXPL AINING THE ITA NO.1104/KOL/2014 (M/S SUBHALAKSHMI VANIJYA PVT. L TD.) & 18 OTHER APPEALS OF DIFFERENT ASSESSEES 51 PROVISIONS OF THE FINANCE BILL, IT BECOMES VIVID TH AT CERTAIN CONTRARY JUDICIAL PRONOUNCEMENTS CREATED DOUBTS ABOUT THE ON US OF PROOF AND THE REQUIREMENTS OF THIS SECTION. THUS, THE AMENDMENT MAKES IT MANIFEST THAT THE INTENTION OF THE LEGISLATURE WAS ALWAYS TO CAST OBLIGATION ON THE CLOSELY HELD COMPANIES TO PROVE RECEIPT OF SHARE CA PITAL ETC. TO THE SATISFACTION OF THE AO AND IT WAS ONLY WITH THE AIM OF SETTING TO NAUGHT CERTAIN CONTRARY JUDGMENTS WHICH ` CREATED DOUBTS ABOUT THE ONUS OF PROOF BY HOLDING THAT THERE WAS NO REQUIREMENT ON T HE COMPANY TO PROVE THE SHARE CAPITAL ETC. AND AS SUCH NO ADDITION COUL D BE MADE IN THE HANDS OF COMPANY EVEN IF SUCH SHARE HOLDERS ARE BOGUS. AS THE AMENDMENT AIMS AT CLARIFYING THE POSITION OF LAW WHICH ALWAYS EXISTED, BUT WAS NOT PROPERLY CONSTRUED IN CERTAIN JUDGMENTS, THERE CAN BE NO DOUBT ABOUT THE SAME BEING RETROSPECTIVE IN OPERATION. 13.AE. THE ABOUT DISCUSSED JUDGMENTS FROM THE HON BLE SUMMIT COURT HOLDING A CLARIFICATORY SUBSTANTIVE PROVISION AS RE TROSPECTIVE, DESPITE THE SAME BEING MADE APPLICABLE FROM A PARTICULAR YEAR, FULLY GOVERN THE POSITION UNDER CONSIDERATION. IT IS INTERESTING TO NOTE THAT THE JUDGMENT ITA NO.1104/KOL/2014 (M/S SUBHALAKSHMI VANIJYA PVT. L TD.) & 18 OTHER APPEALS OF DIFFERENT ASSESSEES 52 OF THE HONBLE JURISDICTIONAL HIGH COURT IN MAITHAN INTERNATIONAL (SUPRA) HOLDING THAT THE BURDEN OF PROVING THE CREDIT OF S HARE CAPITAL ETC. IS ON A CLOSELY HELD COMPANY AND FAILURE TO DO SO A TTRACTS THE RIGOR OF SECTION 68, HAS BEEN DELIVERED ON 21.1.2015, MUCH A FTER THE AMENDMENT CARRIED OUT BY THE FINANCE ACT, 2012. THIS CASE PER TAINS TO PRE- AMENDMENT ERA AS THE ORDER OF THE TRIBUNAL ASSAILED IN THIS CASE IS DATED 24.6.2011. IT SHOWS THAT THE HONBLE HIGH COURT HA S ALSO IMPLIEDLY APPROVED THE PROPOSITION THAT THE POSITION ANTERIOR TO THE A.Y. 2013-14 WAS THE SAME INASMUCH AS THE ONUS TO PROVE THE SHAR E CAPITAL BY A CLOSELY HELD COMPANY WAS ON IT. WE, THEREFORE, HOLD THAT THE AMENDMENT TO SECTION 68 BY INSERTION OF PROVISO IS CLARIFICAT ORY AND HENCE RETROSPECTIVE. THE CONTRARY ARGUMENTS ADVANCED BY T HE LD. AR, BEING DEVOID OF ANY MERIT, ARE HEREBY JETTISONED. 13.AF. AT THIS STAGE, WE CONSIDER IT APPROPRIATE TO DISCUSS THE SUBMISSION OF THE LD. AR THAT A SIMULTANEOUS AMENDM ENT TO SECTION 56(2) CONNECTED WITH THE AMENDMENT TO SECTION 68, HAS ALSO BEEN MADE W.E.F. 1.4.2013 AND HENCE SECTION 68 AMENDMENT IS A LSO RETROSPECTIVE. ITA NO.1104/KOL/2014 (M/S SUBHALAKSHMI VANIJYA PVT. L TD.) & 18 OTHER APPEALS OF DIFFERENT ASSESSEES 53 BEFORE APPRECIATING THIS ARGUMENT, WE SET OUT CLAUS E (VIIB) OF SECTION 56(2) AS UNDER : - WHERE A COMPANY, NOT BEING A COMPANY IN WHICH THE PUBLIC ARE SUBSTANTIALLY INTERESTED, RECEIVES, IN ANY PREVIOUS YEAR, FROM ANY PERSON BEING A RESIDENT, ANY CONSIDERATION FOR ISSU E OF SHARES THAT EXCEEDS THE FACE VALUE OF SUCH SHARES, THE AGGREGAT E CONSIDERATION RECEIVED FOR SUCH SHARES AS EXCEEDS THE FAIR MARKET VALUE OF THE SHARES: SHALL BE CONSIDERED AS INCOME FROM OTHER SOURCES. 13.AG. THIS PROVISION MANDATES THAT WHERE A CLOSEL Y HELD COMPANY RECEIVES ANY CONSIDERATION FOR ISSUE OF SHARES IN A NY PREVIOUS YEAR FROM ANY RESIDENT AND THE CONSIDERATION RECEIVED FOR ISS UE OF SHARES EXCEEDS THE FACE VALUE OF SUCH SHARES, THEN THE AGGREGATE C ONSIDERATION RECEIVED FOR SUCH SHARES, AS EXCEEDS THE FAIR MARKET VALUE O F THE SHARES, SHALL BE CHARGEABLE TO INCOME-TAX UNDER THE HEAD 'INCOME FRO M OTHER SOURCES'. A BARE PERUSAL OF THIS PROVISION MAKES IT EXPLICIT THAT A NEW OBLIGATION HAS BEEN PUT ON THE CLOSELY HELD COMPANIES WHICH IS SUE SHARES FOR A CONSIDERATION GREATER THAN THE FAIR MARKET VALUE OF ITS SHARES. WHEN THE SHARES ARE SO ISSUED AT A HIGHER PRICE, THEN SUCH E XCESS BECOMES INCOME FROM OTHER SOURCES IN THE HANDS OF THE COMPANY. THI S AMENDMENT IS OBVIOUSLY PROSPECTIVE AS THE POSITION OF LAW BEFORE SUCH AMENDMENT WAS ITA NO.1104/KOL/2014 (M/S SUBHALAKSHMI VANIJYA PVT. L TD.) & 18 OTHER APPEALS OF DIFFERENT ASSESSEES 54 DIFFERENT. SUCH SHARE PREMIUM WAS ALWAYS CONSIDERED AS A CAPITAL RECEIPT NOT CHARGEABLE TO TAX. SINCE THIS INSERTION HAS INC REASED THE AMBIT OF INCOME OF SUCH COMPANIES HENCEFORTH FOR THE FIRST T IME, WHICH WAS NOT THE POSITION HITHERTO, IT CEASES TO BE CLARIFICATOR Y AND HENCE CANNOT BE CONSTRUED AS RETROSPECTIVE. 13.AH. WE FAIL TO FIND OUT ANY PARALLEL BETWEEN THE AMENDMENTS MADE TO SECTION 68 AND SECTION 56(2)(VIIB) EXCEPT FOR TH E FACT THAT THESE PROVISIONS HAVE BEEN ADDED BY THE FINANCE ACT, 2012 . A CONJOINT READING OF PROVISO TO SECTION 68 AND SECTION 56(2)( VIIB) DIVULGES THAT WHERE A CLOSELY HELD COMPANY RECEIVES, INTER ALIA , SOME AMOUNT AS SHARE PREMIUM WHOSE GENUINENESS IS NOT PROVED BY TH E ASSESSEE COMPANY OR ITS SOURCE ETC. IS NOT PROVED BY THE SHA REHOLDER TO THE SATISFACTION OF THE AO, THEN THE ENTIRE AMOUNT INCL UDING THE FAIR MARKET VALUE OF THE SHARES, IS CHARGEABLE TO TAX U/S 68 OF THE ACT. IF HOWEVER, THE GENUINENESS OF THE AMOUNT IS PROVED AND THE SHAREH OLDER ALSO PROVES HIS SOURCE, THEN THE HURDLE OF SECTION 68 STANDS CROSSE D AND THE SHARE PREMIUM, TO THE EXTENT STIPULATED, IS CHARGEABLE TO TAX U/S 56(2)(VIIB) OF ITA NO.1104/KOL/2014 (M/S SUBHALAKSHMI VANIJYA PVT. L TD.) & 18 OTHER APPEALS OF DIFFERENT ASSESSEES 55 THE ACT. IT SHOWS THAT ONLY WHEN SOURCE OF SUCH SHA RE PREMIUM IN THE HANDS OF A SHAREHOLDER IS PROPERLY EXPLAINED TO THE SATISFACTION OF THE AO, THAT THE PROVISIONS OF SECTION 56(2)(VIIB) GET S TRIGGERED. APPROACHING THIS SECTION PRE-SUPPOSES THAT THE ASSE SSEE GENUINELY RECEIVED SHARE PREMIUM FROM THE SHARE-HOLDER HAVING SATISFACTORILY EXPLAINED THE TRANSACTION. THUS IT IS EVIDENT THAT SECTIONS 68 AND 56(2)(VIIB) CAN NEVER SIMULTANEOUSLY OPERATE. THE L ATER EXCLUDES THE FORMER AND VICE VERSA . CONSEQUENTLY, WE ARE UNABLE TO ACCEPT THE CONTENTION OF THE LD. AR THAT THE PROVISO TO SECTIO N 68 ATTACHED A NEW OBLIGATION AND HENCE SHOULD BE DECLARED AS PROSPECT IVE. IT IS AXIOMATIC THAT PROVING GENUINENESS OF A TRANSACTION OF ANY CR EDIT, INCLUDING SHARE CAPITAL, WAS ALWAYS AN ESSENTIAL CONSTITUENT OF SEC TION 68. SINCE SECTION 68 COVERS `ANY SUM CREDITED IN THE BOOKS WITHOUT ANY EXCEPTION, WHICH, INTER ALIA, INCLUDES SHARE CAPITAL, IT CANNOT BE HELD THAT THE EXAMINATION OF SHARE CAPITAL WITH PREMIUM ETC. WAS EARLIER OUTSIDE THE AMBIT OF SECTION 68 AND NOW THIS AMENDMENT HAS BROU GHT IT INTO ITS PURVIEW. WE HAVE NOTED IT FROM SEVERAL JUDGMENTS D EALING WITH SHARE ITA NO.1104/KOL/2014 (M/S SUBHALAKSHMI VANIJYA PVT. L TD.) & 18 OTHER APPEALS OF DIFFERENT ASSESSEES 56 CAPITAL IN PRE-AMENDMENT PERIOD AND THE MEMORANDUM EXPLAINING THE PROVISIONS THAT PROVING THE GENUINENESS OF SHARE CA PITAL ETC. BY A COMPANY HAS ALWAYS BEEN CONSIDERED A NECESSARY RE QUIREMENT TO ESCAPE THE MAGNETIZATION OF SECTION 68. THE AMENDM ENT HAS SIMPLY MADE EXPRESS WHICH WAS EARLIER IMPLIED. WE, THEREF ORE, HOLD THAT THOUGH AMENDMENT TO SECTION 56(2)(VIIB) IS PROSPECT IVE, BUT TO SECTION 68 IS PROSPECTIVE. IF THAT IS THE POSITION, THEN T HE ASSESSEE IS ALWAYS OBLIGED TO PROVE THE RECEIPT OF SHARE CAPITAL WITH PREMIUM ETC. TO THE SATISFACTION OF THE AO, FAILURE OF WHICH CALLS FOR ADDITION U/S 68. 13.AI. THE LD. AR RELIED ON THE JUDGMENT OF THE H ONBLE BOMBAY HIGH COURT IN VODAFONE INDIA SERVICES PVT. LTD. VS. ADDL. CIT (20 14) 368 ITR 1 (BOM) TO CONTEND THAT SHARE PREMIUM CAN UNDER NO CIRCUMST ANCES BE CONSTRUED AS A REVENUE RECEIPT CHARGEABLE TO TAX. HE SUBMITTED THAT THE LD. CIT WAS NOT JUSTIFIED IN REVISING THE ASSESSMEN T ORDER REQUIRING THE AO TO EXAMINE THE RECEIPT OF SHARE CAPITAL/PREMIUM FROM THE ANGLE OF TAXABILITY. IT WAS ARGUED THAT THE SHARE PREMIUM CA N BE CHARGED TO TAX ITA NO.1104/KOL/2014 (M/S SUBHALAKSHMI VANIJYA PVT. L TD.) & 18 OTHER APPEALS OF DIFFERENT ASSESSEES 57 ONLY IN THE CIRCUMSTANCES GIVEN IN SECTION 56(2)(VI IB) AND THAT TOO FROM THE ASSESSMENT YEAR 2013-14. 13.AJ. WE ARE IN FULL AGREEMENT WITH THE LD. AR THAT THE JUDGMENT IN THE CASE OF VODAFONE INDIA SERVICES (SUPRA) IS AN AUTHORITY FOR THE PROPOSITION THAT SHARE CAPITAL/PREMIUM ARE CAPITAL RECEIPTS AND CANNOT BE CHARGED TO TAX. WE ALSO FULLY ENDORSE THE ARGUM ENT ABOUT THE INTRODUCTION OF SECTION 56(2)(VIIB) W.E.F. ASSESSME NT YEAR 2013-14 WHICH PROVIDES FOR CHARGING SHARE PREMIUM TO TAX IN THE C IRCUMSTANCES AND TO THE EXTENT PROVIDED THEREIN. HOWEVER, IT IS SIGNIFI CANT TO NOTE THAT WE ARE NOT CONCERNED WITH THE CHARGEABILITY OF SHARE PREMI UM TO TAX IN THE PRESENT APPEAL. HERE, THE QUESTION IS ABOUT THE TA XABILITY OR OTHERWISE OF SUCH SHARE CAPITAL/PREMIUM IN TERMS OF SECTION 68. IT IS SELF EVIDENT THAT WHEN THE ASSESSEE FAILS TO PROVE THE IDENTITY AND C APACITY OF SHAREHOLDERS ALONG WITH THE GENUINENESS OF TRANSACTIONS, THE AMO UNT OF SHARE CAPITAL, ETC. IS LIABLE TO BE ADDED U/S 68. IT IS ONLY WHER E SHARE CAPITAL/ PREMIUM ARE GENUINELY RECEIVED AND ALL THE THREE NECESSARY INGREDIENTS STAND PROVED TO THE SATISFACTION OF THE AO THAT THE SHARE PREMIUM IS NOT ITA NO.1104/KOL/2014 (M/S SUBHALAKSHMI VANIJYA PVT. L TD.) & 18 OTHER APPEALS OF DIFFERENT ASSESSEES 58 CHARGEABLE TO TAX BEFORE ASSESSMENT YEAR 2013-14 AN D, THEREAFTER, CHARGEABLE TO THE EXTENT AND IN THE CIRCUMSTANCES A S ENSHRINED IN SECTION 56(2)(VIIB). THIS CONTENTION, CONSEQUENTLY, FAILS. 13.AK. TO SUM UP, WE HOLD THAT THE CONTENTION OF THE LD. AR THAT SINCE THE AO OF THE ASSESSEE-COMPANY IS NOT EMPOWERED TO EXAMINE OR MAKE ANY ADDITION ON ACCOUNT OF RECEIPT OF SHARE CAPITAL WITH OR WITHOUT PREMIUM BEFORE AMENDMENT BY THE FINANCE ACT, 2012 W .E.F. A.Y. 2013- 14 AND HENCE THE CIT BY MEANS OF IMPUGNED ORDER U/S 263 COULD NOT HAVE DIRECTED THE AO TO DO SO, IS UNSUSTAINABLE. B. NOW WE ESPOUSE THE SECOND BROADER QUESTION AS TO WHETHER THE FAILURE OF THE AO TO GIVE A LOGICAL CONCLUSION TO T HE ENQUIRY CONDUCTED BY HIM GIVES POWER TO THE CIT TO REVISE THE ASSESSM ENT ORDER? 14. IN THIS REGARD, SH. PODDAR SUBMITTED THAT TH E AO, DURING THE COURSE OF PROCEEDINGS U/S 147, THOROUGHLY EXAMINED THE QU ESTION OF ISSUE OF SHARE CAPITAL AT PREMIUM. NOT ONLY NOTICES U/S 133 (6) WERE ISSUED TO MAJORITY OF THE SUBSCRIBERS, BUT SUCH NOTICES WERE ALSO PROPERLY RESPONDED GIVING COMPLETE DETAILS OF THEIR IDENTITY WITH PANS ETC., AND ITA NO.1104/KOL/2014 (M/S SUBHALAKSHMI VANIJYA PVT. L TD.) & 18 OTHER APPEALS OF DIFFERENT ASSESSEES 59 ALSO THE SOURCES OF INVESTMENT, BEING COPIES OF BAN K ACCOUNTS FROM WHICH THE MONIES WERE INVESTED BY THEM IN THE ASSES SEE COMPANYS SHARE CAPITAL. HE TOOK US THROUGH CERTAIN PAGES OF THE PAPER BOOK WHICH INDICATE THAT THE AO CALLED FOR INFORMATION FROM SO ME OF THE SUBSCRIBERS, WHO SUBMITTED THE NECESSARY DETAILS. THE LD. AR CO NTENDED THAT THE AO, ON EXAMINATION OF SUCH MATERIAL, GOT SATISFIED WITH THE GENUINENESS OF TRANSACTIONS ALONG WITH IDENTITY AND CAPACITY OF TH E SHAREHOLDERS. IN SUCH CIRCUMSTANCES, IT COULD NOT BE SAID THAT THE A O DID NOT PROPERLY APPLY HIS MIND. IT WAS STATED THAT THE WAY IN WHIC H ASSESSMENT SHOULD BE FINALIZED FALLS IN THE EXCLUSIVE DOMAIN OF THE A O. RELYING ON SECTION 142(1) AND 143(2) OF THE ACT, THE LD. AR STATED THA T IT IS WITHIN THE PROVINCE OF THE AO TO DECIDE THAT WHICH POINTS HE W ANTS TO TAKE UP FOR ENQUIRY AND TO WHAT EXTENT AND, AS SUCH, THE CIT CA NNOT INTERFERE WITH THE SAME. IT WAS CONTENDED THAT ONCE AN ENQUIRY IS CONDUCTED BY THE AO, EVEN IF INADEQUATE, THAT PRECLUDES THE CIT FROM TAK ING RECOURSE TO REVISION U/S 263. HE ARGUED THAT AT WORST, IT MAY BE A CASE OF AN INADEQUATE ENQUIRY BUT CANNOT BE BRANDED AS LACK OF ENQUIRY. HE TOOK US ITA NO.1104/KOL/2014 (M/S SUBHALAKSHMI VANIJYA PVT. L TD.) & 18 OTHER APPEALS OF DIFFERENT ASSESSEES 60 THROUGH CERTAIN DECISIONS FOR CANVASSING A VIEW THA T REVISION U/S 263 IS POSSIBLE ONLY IN CASE OF LACK OF ENQUIRY AND NOT IN ADEQUATE ENQUIRY. IT WAS ALSO ARGUED THAT THE ORDER OF THE CIT IS BASED ON SUSPICION AND SURMISES AND HAS NO LEGAL LEGS TO STAND ON, MORE SO , WHEN THE AO TOOK A POSSIBLE VIEW ON THE MATTER. 15. THE OTHER LD. COUNSEL HAVE ADOPTED THE ARGU MENTS OF SH. PODDAR ON MERITS EXCEPT FOR SEPARATELY GIVING ACCOUNT OF S OME MINOR DIFFERENCES, SUCH AS, THE AMOUNT OF SHARE PREMIUM, NUMBER OF SUBSCRIBERS EXAMINED BY THE AO, THE INFORMATION SUB MITTED BY SUCH SHAREHOLDERS ACCEPTING SUBSCRIPTION TO THE SHARES OF THE COMPANIES AT THE GIVEN PREMIUM IN THEIR RESPECTIVE CASES. SUCH MINOR DIFFERENCES IN THE FACTS OF EACH CASE IN THIS BATCH OF APPEAL, IN OUR CONSIDERED OPINION, HAVE NO BEARING ON THE OVERALL LEGAL POSITION EMERG ING ON THE MERITS OF THE CASE, EXCEPT FOR CASE SPECIFIC SEPARATE LEGAL I SSUES CHALLENGED BEFORE US, WHICH WE WILL ADVERT TO A LITTLE LATER IN THIS ORDER. 16. FIRSTLY, WE ARE PROCEEDING TO EXAMINE THE L EGALITY OF THE IMPUGNED ORDERS ON MERITS, WHICH IS COMMON TO ALL THE CASES UNDER CONSIDERATION. ITA NO.1104/KOL/2014 (M/S SUBHALAKSHMI VANIJYA PVT. L TD.) & 18 OTHER APPEALS OF DIFFERENT ASSESSEES 61 THE LARGER QUESTION OF THE VALIDITY OF THE ORDERS P ASSED U/S 263 CAN BE DECIDED BY EXAMINING THE FOLLOWING ASPECTS, WHICH H AVE BEEN ARGUED BY THE LD. AR : - I) WHETHER THE ENQUIRY CONDUCTED BY THE AO IN SUCH CAS ES CAN BE CONSTRUED AS A PROPER ENQUIRY? II) WHETHER CIT CAN SET ASIDE THE ASSESSMENT ORDER AND DIRECT THE AO TO CONDUCT A THOROUGH ENQUIRY, THEREBY INTERFERI NG WITH THE JURISDICTION OF THE AO CONFERRED ON HIM IN TERMS OF SECTION 142(1) AND 143(2) OF THE ACT? III) WHETHER INADEQUATE INQUIRY CONDUCTED BY THE AO EMPO WERS THE CIT TO REVISE THE ASSESSMENT ORDER? IV) WHETHER THE ORDER OF THE CIT IS BASED ON IRRELEVANT CONSIDERATION AND FURTHER WAS HE NOT SUPPOSED TO P OINT OUT SPECIFICALLY WHERE THE AO WENT WRONG IN NOT PROPERL Y EXAMINING THE ISSUE OF SHARE CAPITAL? V) IF THE AO HAS TAKEN A POSSIBLE VIEW, CAN STILL THE REVISION BE ORDERED? ITA NO.1104/KOL/2014 (M/S SUBHALAKSHMI VANIJYA PVT. L TD.) & 18 OTHER APPEALS OF DIFFERENT ASSESSEES 62 WE WILL EXAMINE ALL THE ABOVE ASPECTS, ONE BY ONE. I) WHETHER THE ENQUIRY CONDUCTED BY THE AO CAN BE CONS TRUED AS A PROPER ENQUIRY? 17.A. THERE IS NO DENIAL OF THE FACT THAT THE AO DID ISSUE NOTICES U/S 133(6) OF THE ACT TO SOME OF THE SUBSCRIBERS OF THE SHARE CAPITAL, WHO, IN TURN SUBMITTED DETAILS OF THEIR PANS, BANK ACCOUNTS , ETC., COPIES OF WHICH HAVE BEEN PLACED ON RECORD. THE AO KEPT SUCH DOCUMENTS ON RECORD AND CAME TO HOLD THAT THE SHARE CAPITAL WAS RIGHTLY SUBSCRIBED AND THERE WAS NO CASE FOR INVOKING THE PROVISIONS OF SE CTION 68. IN THIS PROCESS, HE DID NOT CONSIDER IT FRUITFUL TO COMPREH END THE RATIONALE OR LOGIC BEHIND ISSUING SHARES AT SUCH A HIGH PREMIUM, NOR TO EXAMINE ANY OF THE DIRECTORS OF THE COMPANIES WHICH WERE SUBSCR IBERS TO SHARE CAPITAL. NO ATTEMPT WAS MADE TO REQUIRE THE ASSESSE E TO JUSTIFY THE CHARGING OF SUCH A HIGH PREMIUM AND FURTHER WHAT PR OMPTED THE SUBSCRIBERS TO PURCHASE SHARES AT SUCH A HUGE PREMI UM WHEN THE COMPANY DID NOT HAVE ANY WORTHWHILE NET WORTH AND W AS RELATIVELY A NEW ONE WITHOUT ANY BUSINESS ACTIVITY. APPEAL OF RAMSHILA ENTERPRISES ITA NO.1104/KOL/2014 (M/S SUBHALAKSHMI VANIJYA PVT. L TD.) & 18 OTHER APPEALS OF DIFFERENT ASSESSEES 63 PVT. LTD. HAS BEEN HEARD BY US AS A REPRESENTATIVE CASE ON MERITS AND IT IS THE COMMON SUBMISSION OF THE OTHER ASSESSES THAT FA CTS AND CIRCUMSTANCES ARE SIMILAR. NOW LET US SEE THE SO-CA LLED ENQUIRY CONDUCTED BY THE AO IN THE CASE OF RAMSHILA ENTERPR ISES, WHICH HAS TWO DIRECTORS, NAMELY SH. SHAM LAL KHAITAN AND SH. ANKI T KUMAR KHAITAN. IN ALL IT HAS 51 SHAREHOLDERS, OUT OF WHICH THE AO CALLED FOR THE PARTICULARS ONLY FROM TEN COMPANIES TO WHOM SHARES WITH FACE VALUE OF RS.10 WERE ISSUED AT RS.190 EACH. OUT OF SUCH TEN COMPANIES, THERE ARE EIGHT COMPANIES [GURURKUL DEALERS (P) LTD., RICH VA LLEY TRADERS (P) LTD., FETISH TRADERS (P) LTD., TANYA ENCLAVE (P) LT D., DOLPHIN TIE-UP (P) LTD., GAJANAN DEALERS (P) LTD., DREAMZ VANIJ YA (P) LTD., AND SHAMBHURESHWAR VINCOM (P) LTD.], IN WHICH THE DIRE CTORS OF THE ASSESSEE COMPANY ARE, IN TURN, DIRECTORS. THIS FA CT HAS BEEN BROUGHT TO OUR ATTENTION FROM THE NOTICES ISSUED BY THE AO TO THESE COMPANIES WHICH BEAR SIGNATURES OF SH. SHAM LAL KHAITAN OR SH . ANKIT KUMAR KHAITAN AS RECEIVER OF NOTICES ON BEHALF OF SUCH CO MPANIES. RELEVANT DOCUMENTS HAVE BEEN PLACED IN THE DEPARTMENTAL PAPE R BOOK. NOW LET ITA NO.1104/KOL/2014 (M/S SUBHALAKSHMI VANIJYA PVT. L TD.) & 18 OTHER APPEALS OF DIFFERENT ASSESSEES 64 US HAVE A LOOK AT THE PROFIT AND LOSS ACCOUNT OF RA MSHILA ENTERPRISES P. LTD., A COPY OF WHICH HAS BEEN PLACED AT PAGE 26 OF THE ASSESSEES PAPER BOOK, FOR HAVING AN IDEA OF THE EXTENT OF ITS INCOM E WITH A VIEW TO ASCERTAIN JUSTIFICATION FOR PREMIUM OF RS.190 AGAIN ST THE FACE VALUE OF RS.10. IT CAN BE NOTICED THAT ON THE INCOME SIDE, T HERE IS ONLY ONE ITEM OF INCOME, NAMELY, INTEREST RECEIVED OF RS. 2,20,96 2. ON THE EXPENSES SIDE, THERE ARE ADMINISTRATIVE EXPENSES OF RS. 1,97 ,783 AND PRELIMINARY EXPENSES WRITTEN OFF TO THE TUNE OF RS.27,232 AND N ET RESULT IS LOSS OF RS.4,053. THE PORTRAIT OF THE ASSESSEES STATE OF AFFAIRS EVIDENT ON THE VERY FACE OF IT, EMERGING EVEN ON A CASUAL LOOK, IN OUR CONSIDERED OPINION WAS SUFFICIENT ENOUGH TO PROMPT THE AO TO I NVESTIGATE THE MATTER FURTHER AND NOT STOP AT MERELY COLLECTING NE CESSARY DETAILS FROM THE COMPANIES, MOST OF WHICH HAD THE DIRECTORS OF T HE ASSESSEE COMPANY ONLY. 17.B. THE HONBLE SUPREME COURT IN SUMATI DAYAL VS. CIT (1995) 214 ITR 801 (SC) CONSIDERED A QUESTION WHETHER THE APPARENT CAN B E CONSIDERED AS REAL. IT WAS OBSERVED THAT APPARENT M UST BE CONSIDERED REAL ITA NO.1104/KOL/2014 (M/S SUBHALAKSHMI VANIJYA PVT. L TD.) & 18 OTHER APPEALS OF DIFFERENT ASSESSEES 65 UNTIL IT IS SHOWN THAT THERE ARE REASONS TO BELIEVE THAT THE APPARENT IS NOT THE REAL AND THAT THE TAXING AUTHORITIES ARE ENTITLED TO LOOK INTO TH E SURROUNDING CIRCUMSTANCES TO FIND OUT THE REALITY A ND THE MATTER HAS TO BE CONSIDERED BY APPLYING THE TEST OF HUMAN PROBABI LITIES. IT WAS FURTHER OBSERVED THAT AN INFERENCE SHOULD BE DRAWN ON THE B ASIS OF THE CIRCUMSTANCES AVAILABLE ON THE RECORD. CONSIDERING THE CIRCUMSTANCES OF THE TRANSACTION IN THAT CASE, THE HONBLE SUPREME C OURT HAS HELD THAT AN INFERENCE COULD REASONABLY BE DRAWN THAT THE WINNIN G TICKETS WERE PURCHASED BY THE APPELLANT AFTER THE EVENT AND THE AUTHORITIES WERE RIGHT IN DRAWING AN ADVERSE INFERENCE AGAINST THE ASSESSE E. 17.C. ADVERTING TO THE FACTS OF THE INSTANT CASE , WE FIND THAT THE CIRCUMSTANCES AS DISCUSSED IN EARLIER PARA INDICATE D THAT THE APPARENT DID NOT PRIMA FACIE APPEAR TO BE REAL AND FURTHER INVESTIGATION WAS CA LLED FOR. IT IS HIGHLY IMPROBABLE FOR ANY PERSON HAVING SOUND MIND TO PURCHASE AT ARMS LENGTH THE SHARES OF A PRIVATE LIMITED COMPAN Y, HARDLY HAVING ANY WORTH, WITH FACE VALUE OF RS.10 AT A PREMIUM OF RS. 190. THIS MERE FACT SHOULD HAVE BEEN CORNERSTONE FOR THE AO TO EMBARK U PON FURTHER ENQUIRY ITA NO.1104/KOL/2014 (M/S SUBHALAKSHMI VANIJYA PVT. L TD.) & 18 OTHER APPEALS OF DIFFERENT ASSESSEES 66 TO UNEARTH THE TRUTH. THE GENUINENESS OF TRANSACT IONS OF ISSUE OF SHARE AT SUCH HEFTY PREMIUM IN THIS BACKGROUND OF THE MATTER WAS UNDER DARK CLOUD AND IT SKIPPED THE ATTENTION OF THE AO. THE C ONTENTION OF THE ASSESSEE THAT THE CAPACITY OF THE SHARE SUBSCRIBERS WAS PROVED AS THEY SUBSCRIBED TO SHARES THROUGH BANKING CHANNELS AFTER OFFLOADING THEIR INVESTMENTS IN SHARES OF OTHER COMPANIES, NEEDS TO BE WEIGHED PROPERLY IN THE BACKGROUND OF THE TRANSACTIONS IN THE INSTAN T CASES. IN SO FAR AS THE ESTABLISHMENT OF GENUINENESS OF PAYMENT MADE THROUG H BANKING CHANNELS IS CONCERNED, WE NEED NOT GO ANYWHERE ELSE EXCEPT LOOKING AT THE JUDGMENT OF THE HONBLE JURISDICTIONAL HIGH COU RT IN CIT VS. PRECISION FINANCE P. LTD. (1994) 208 ITR 465 (CAL) , IN WHICH IT HAS BEEN HELD THAT : `MERE PAYMENT BY ACCOUNT PAYEE CHE QUE IS NOT SACROSANCT NOR CAN IT MAKE A NON-GENUINE TRANSACTIO N GENUINE. IN OUR CONSIDERED OPINION, THE AO MISERABLY FAILED TO EXAM INE ALL SUCH RELEVANT ASPECTS, WHICH MUST HAVE BEEN GONE INTO DURING THE COURSE OF ASSESSMENT PROCEEDINGS. ITA NO.1104/KOL/2014 (M/S SUBHALAKSHMI VANIJYA PVT. L TD.) & 18 OTHER APPEALS OF DIFFERENT ASSESSEES 67 17.D. POSITION IS MORE OR LESS SAME IN ALL THE C ASES UNDER CONSIDERATION AND OTHER CASES, WHICH WE ARE SIMULTANEOUSLY DISPOS ING BY SEPARATE ORDERS. IT IS SIGNIFICANT TO NOTE THAT ALMOST IN A LL SUCH CASES, THE SAME SET OF SHAREHOLDER COMPANIES OF ONE COMPANY FIND THEIR NAMES IN THE LIST OF INVESTEE COMPANIES, WHOSE SHARES HAVE BEEN PURCHASE D BY SUCH COMPANIES. IT IS MANIFEST FROM A CHART FILED BY TH E LD. AR IN THE CASE OF ARADHANA PLAZA PRIVATE LIMITED SHOWING THE LIST OF SHARE SUBSCRIBERS WHO HAVE BEEN SUBJECTED TO PROCEEDINGS U/S 263. IT HAS BEEN DEMONSTRATED THAT THREE OF THE SHAREHOLDERS OF THIS COMPANY, NAMELY, RBM FINANCE PVT. LTD., D. D. DEPOSITS AND ADVANCES PVT. LTD. AND SUDHAKAR COMMODEAL (P) LTD. HAVE ALSO BEEN SUBJEC TED TO REVISION U/S 263 ON THE SAME SCORE. IT HAS FURTHER BEEN SHOWN T HAT SIX COMPANIES (GURU AMARDAS HIRE PURCHASE PVT. LTD., JNJ FINANCE CO. P. LTD., OLIVER VANIJYA P. LTD., PALTANI INVESTEMNT & FINANCE CO. L TD., RMB FINANCE CO. LTD. AND SSA HIRE PURCHASE P. LTD.) WHOSE SHARE S HAVE BEEN PURCHASED BY ARADHANA PLAZA PRIVATE LIMITED HAVE AL SO BEEN SUBJECTED TO REVISIONS U/S 263 IN SIMILAR CIRCUMSTANCES. ITA NO.1104/KOL/2014 (M/S SUBHALAKSHMI VANIJYA PVT. L TD.) & 18 OTHER APPEALS OF DIFFERENT ASSESSEES 68 17.E. SIMILAR IS THE POSITION IN CASE OF KASTURI HOME PVT. LTD., FOR WHICH THE LD. AR HAS FILED A SEPARATE CHART SHOWING THE LIST OF SHARE SUBSCRIBERS WHO HAVE BEEN SUBJECTED TO PROCEEDINGS U/S 263. IT HAS BEEN SHOWN THAT THREE OF THE SHAREHOLDERS OF THIS COMPAN Y, NAMELY, RAJLAKHMI VANIJYA PVT. LTD., GURU AMARDAS HIRE PURC HASE PVT. LTD. AND PALTANI INVESTMENT & FINANCE CO. PVT. LTD. HAVE AL SO BEEN SUBJECTED TO REVISION U/S 263 ON THE SAME SCORE. IT HAS FURTHER BEEN SHOWN THAT SEVEN COMPANIES (D. D. DEPOSITS AND ADVANCES PVT. LTD., R BM FINANCE PVT. LTD., JNJ FINANCE CO. P. LTD., MANDYATI DEALCOMM P VT. LTD., NIRUPAMA COMMERCE PVT. LTD SHAKER CREDITS PVT. LTD. AND SSA HIRE PURCHASE P. LTD.) WHOSE SHARES HAVE BEEN PURCHASED BY KASTURI H OME PVT. LTD., HAVE ALSO BEEN SUBJECTED TO REVISIONS U/S 263 IN SI MILAR CIRCUMSTANCES. 17.F. SAME POSITION PREVAILS IN THE CASE OF MARIG OLD NIRMAN PVT. LTD., FOR WHICH THE LD. AR HAS FILED A DISTINCT CHART SH OWING THE LIST OF SHARE SUBSCRIBERS WHO HAVE BEEN SUBJECTED TO PROCEEDINGS U/S 263. IT HAS BEEN DEMONSTRATED THAT FIVE OF THE SHAREHOLDERS OF THIS COMPANY, NAMELY, RBM FINANCE PVT. LTD., D. D. DEPOSITS AND ADVANCES PVT. LTD., ITA NO.1104/KOL/2014 (M/S SUBHALAKSHMI VANIJYA PVT. L TD.) & 18 OTHER APPEALS OF DIFFERENT ASSESSEES 69 MONALISA GOODS PVT. LTD., IMPROVE INVESTMENT MANAGE MENT PVT. LTD AND SHANKAR CREDITS PVT. LTD. HAVE ALSO BEEN SUBJ ECTED TO REVISION U/S 263 ON THE SAME SCORE. IT HAS FURTHER BEEN SHOWN T HAT SIX COMPANIES (GURU AMARDAS HIRE PURCHASE PVT. LTD., JNJ FINANCE CO. P. LTD., PALTANI INVESTEMNT & FINANCE CO. LTD., RMB FINANCE CO. LTD., ADONIS NIRMAN PVT. LTD. AND SUDARSHAN GOODS PVT. LTD.) WHO SE SHARES HAVE BEEN PURCHASED BY MARIGOLD NIRMAN PRIVATE LIMITED H AVE ALSO BEEN SUBJECTED TO REVISIONS U/S 263 IN SIMILAR CIRCUMSTA NCES. A CLOSE SCRUTINY OF THE NAMES OF THE SHAREHOLDERS AND INVESTEE COMPA NIES IN RESPECT OF THE ABOVE DISCUSSED THREE COMPANIES, WHOSE DETAILS HAVE BEEN FILED BY THE LD. AR, DIVULGES THAT THE NAMES OF COMPANIES AR E ROTATING FROM BEING A SHAREHOLDER IN ONE COMPANY TO INVESTEE COMPANY IN OTHER. TO CITE EXAMPLE, RBM FINANCE PVT. LTD., WHICH IS SHAREHOLDE R IN ARADHANA PLAZA PVT. LTD. IS INVESTEE COMPANY IN KASTURI HOME PVT. LTD AND MARIGOLD NIRMAN PVT. LTD. SIMILARLY, PALTANI INVES TMENT & FINANCE CO. PVT. LTD. WHO IS SHAREHOLDER IN KASTURI HOME PVT. L TD IS INVESTEE COMPANY IN MARIGOLD NIRMAN PVT. LTD AND ARADHANA PL AZA PVT. LTD. ITA NO.1104/KOL/2014 (M/S SUBHALAKSHMI VANIJYA PVT. L TD.) & 18 OTHER APPEALS OF DIFFERENT ASSESSEES 70 THIS SHOWS THAT THE SHAREHOLDER COMPANIES OF ONE CO MPANY BECOME INVESTEE COMPANIES OF OTHER COMPANIES AND IN TURN, SUCH LATER COMPANY, WHOSE SHARES ARE PURCHASED, FURTHER INVEST IN THE S HARES OF OTHER COMPANIES, SO ON AND SO FORTH. THIS IS A STRIKING EXAMPLE OF CIRCULATION OF CAPITAL FROM ONE COMPANY TO ANOTHER AND THE ROTA TION IS CONTINUING IN ALL THE COMPANIES UNDER CONSIDERATION. THIS CONCLUS ION FINDS FURTHER CORROBORATION FROM THE ARGUMENTS ADVANCED BY SOME O F THE LD. ARS, WHILE JUSTIFYING ISSUE OF SHARES AT PREMIUM, ADMITT ING THAT ALL THE SHARES WERE ISSUED TO THE RELATED COMPANIES ONLY AND PREMI UM WAS CHARGED TO AVOID PAYMENT OF FEES PAYABLE TO THE REGISTRAR OF C OMPANIES ON THE HIGHER FIGURE OF AUTHORISED CAPITAL AT THE TIME OF INCORPORATION. WE FAIL TO FIND IT AS A SHEER COINCIDENCE THAT HUNDREDS OF COMPANIES BROUGHT INTO EXISTENCE, HAVING LINK WITH EACH OTHER AND NONE OF THEM DOING ANY WORTHWHILE BUSINESS ACTIVITY, COME TOGETHER TO ISSU E SHARES AT SUCH A HUGE PREMIUM. AT BEST, THIS ARGUMENT COULD HAVE BEE N TAKEN INTO CONSIDERATION IF THESE COMPANIES HAD ISSUED SHARES TO ITS RELATED COMPANIES AT PREMIUM AND INVESTED THE PROCEEDS IN S OME OTHER BUSINESS ITA NO.1104/KOL/2014 (M/S SUBHALAKSHMI VANIJYA PVT. L TD.) & 18 OTHER APPEALS OF DIFFERENT ASSESSEES 71 ACTIVITY AND NOT PURCHASING THE SHARES OF OTHER REL ATED COMPANIES THROUGH SUCH A CIRCULAR ROUTE. THIS SHOWS THAT THE TRANSACTIONS OF ISSUING SHARES AT A PREMIUM TO RELATED COMPANIES AND THEN P URCHASING THE SHARES OF OTHER RELATED COMPANIES AT A HUGE MARKET PRICE A ND NONE OF THE COMPANIES HAS ANY WORTHWHILE BUSINESS ACTIVITY, WHE N CONSIDERED ON AN OVERALL BASIS, IS NOTHING BUT A SMOKESCREEN. 17.G. THE LD. AR UNSUCCESSFULLY TRIED TO JUSTIFY THE PREMIUM BY SUBMITTING THAT THE BREAK-UP VALUE OF THE SHARES OF THE ASSESSEE COMPANIES IS QUITE SUBSTANTIAL, SOMEWHERE CLOSE TO THE PREMIUM. THIS BREAK-UP VALUE HAS BEEN COMPUTED BY ADDING THE SHAR E CAPITAL (SAY, FACE VALUE OF RS. 10) AND RESERVE & SURPLUS (SAY, PREMIU M OF RS.190) AND THEN DIVIDED WITH THE NUMBER OF SHARES ISSUED. THIS EXERCISE LEADS US TO NOWHERE. THE REASON IS OBVIOUS THAT BREAK-UP VALUE IS BEING COMPUTED AFTER TAKING INTO CONSIDERATION THE SHARE PREMIUM R ECEIVED WITH THIS ISSUE OR AN EARLIER ISSUE ON THE SAME PATTERN. SUCH A BREAK-UP VALUE AT THE CLOSE OF THE YEAR AFTER ISSUE OF SHARES AT PREMIUM, IS BOUND TO REMAIN CLOSE TO THE ISSUE PRICE OF SHARES WITH PREMIUM. WH AT IS REQUIRED TO BE ITA NO.1104/KOL/2014 (M/S SUBHALAKSHMI VANIJYA PVT. L TD.) & 18 OTHER APPEALS OF DIFFERENT ASSESSEES 72 SHOWN IS THE BREAK-UP VALUE OF SHARES DE HORS THE ISSUE OF ANY SHARES AT PREMIUM. SINCE NONE OF THESE COMPANIES HAS ANY OTH ER BUSINESS ACTIVITY EXCEPT CIRCULATION OF MONEY FROM ONE COMPANY TO ANO THER AND BY SUBSCRIBING TO OR PURCHASING SHARES OF OTHER COMPAN IES AT PREMIUM/MARKET PRICE, THERE CAN BE NO JUSTIFICATION OF SUCH A HUGE PREMIUM. WE SEE NO FORCE IN THIS CONTENTION OF THE LD. AR. 17.H. WHEN WE SEE THE ENTIRE CONSPECTUS OF THE FA CTS OF THE COMPANIES BEFORE US, THERE REMAINS NO DOUBT WHATSOEVER THAT I N THE GIVEN CIRCUMSTANCES, THE AO CONDUCTED HALF-BAKED ENQUIRY IGNORING VITAL ASPECTS WHICH WERE REQUIRED TO BE EXAMINED. IF A C OMPANY RECENTLY INCORPORATED WITHOUT CARRYING OUT ANY WORTHWHILE BU SINESS ACTIVITY ISSUES SHARES WITH FACE VALUE OF RS.10/- AT A PREMI UM OF RS.190/-, THE IMMEDIATE CONCERN OF THE AO OUGHT TO HAVE BEEN TO F IND OUT AS TO WHETHER THE RECEIPT OF SUCH A PREMIUM WAS JUSTIFIED AND WHETHER THE PARAMETERS OF SECTION 68 STOOD COMPLIED WITH. IN TH E INSTANT CASE, THE AO MERELY ISSUED NOTICES U/S 133(6) TO SOME OF THE SHAREHOLDERS WHOSE REPLIES, INDICATING THAT THEY OVERTLY PURCHASED THE SHARES AT RS.200/- ITA NO.1104/KOL/2014 (M/S SUBHALAKSHMI VANIJYA PVT. L TD.) & 18 OTHER APPEALS OF DIFFERENT ASSESSEES 73 EACH, WERE KEPT ON RECORD. PUTTING A LID AT THE MA TTER AT THAT STAGE ONLY, THE AO DID NOT CONSIDER IT PRUDENT TO EXAMINE SUCH SHAREHOLDERS AS TO THEIR CAPACITY AND GENUINENESS OF THE TRANSACTIONS. CONFRONTED WITH SUCH PECULIAR AND HAIR-RAISING CIRCUMSTANCES, THE AO SH OULD HAVE GOT ALERTED AND DUG THE MATTER DEEP FOR UNEARTHING THE REALITY OF THE TRANSACTION. UNFORTUNATELY, NOTHING OF THIS SORT WAS DONE BY HIM . IT IS A PERFECT CITATION FOR A COMPLETE NON-APPLICATION OF MIND BY THE AO AND OF PASSING THE ASSESSMENT ORDER IN UNDUE HASTE. 17.I. WE AGREE WITH THE CONTENTION OF THE LD. AR THAT THE MERE FACT OF COMPLETING AN ASSESSMENT WITHIN A SHORT PERIOD OF S AY ONE OR TWO MONTHS, PER SE, CANNOT LEAD TO AN IRREVERSIBLE CONCLUSION THAT THE ASSESSMENT WAS DONE IN UNDUE HASTE. BUT WHERE THE PRIMARY FACTS THEMSELVES POINT OUT OBJECTIVELY TOWARDS THE NEED T O CARRY OUT FURTHER INVESTIGATION, AS IS THERE IN ALL THE CASES UNDER C ONSIDERATION, WHICH THE AO FAILS TO CARRY OUT, IT WILL BE CALLED AS A CASE OF PASSING ASSESSMENT ORDERS IN UNDUE HASTE WITHOUT APPLICATION OF MIND. ALL THE CASES UNDER CONSIDERATION HAVE THE SAME COMMON FEATURE OF PASSI NG ASSESSMENT ITA NO.1104/KOL/2014 (M/S SUBHALAKSHMI VANIJYA PVT. L TD.) & 18 OTHER APPEALS OF DIFFERENT ASSESSEES 74 ORDERS IN UNDUE HASTE. WHEN WE CONSIDER THE ABOVE FACTUAL MATRIX, THERE CAN BE NO ESCAPE FROM AN AXIOMATIC CONCLUSION THAT IN ALL THESE CASES THE ENQUIRY CONDUCTED BY THE AOS IS EXCEEDINGLY INADEQU ATE AND HENCE FALL IN THE CATEGORY OF `NO ENQUIRY CONDUCTED BY THE AO , WHAT TO TALK OF CHARACTERING IT AS AN `INADEQUATE ENQUIRY. IN OUR CONSIDERED OPINION, THE HIGHLY INADEQUATE ENQUIRY CONDUCTED BY THE AO R ESULTING IN DRAWING INCORRECT ASSUMPTION OF FACTS, MAKES THE ORDERS ERR ONEOUS AND PREJUDICIAL TO THE INTERESTS OF THE REVENUE. II. WHETHER CIT CAN SET ASIDE THE ASSESSMENT ORDER AND DIRECT THE AO TO CONDUCT A THOROUGH ENQUIRY, THEREBY INTERFERI NG WITH THE JURISDICTION OF THE AO CONFERRED ON HIM IN TERMS OF SECTION 142(1) AND 143(2) OF THE ACT? 18.A. THE LD. AR SUBMITTED THAT THE LD. CIT WAS W HOLLY UNJUSTIFIED IN DIRECTING THE AO TO EXAMINE SHARE CAPITAL IN THE WA Y HE CONSIDERED IT EXPEDIENT. IT WAS ARGUED THAT WHEN THE AO ISSUED N OTICES TO SOME OF THE SUBSCRIBERS TO THE SHARE CAPITAL AND SATISFIED HIMS ELF ABOUT THE GENUINENESS OF THE TRANSACTIONS, THEN, IT WAS NOT P OSSIBLE FOR THE LD. CIT ITA NO.1104/KOL/2014 (M/S SUBHALAKSHMI VANIJYA PVT. L TD.) & 18 OTHER APPEALS OF DIFFERENT ASSESSEES 75 TO STEP INTO THE SHOES OF THE AO AND DIRECT HIM TO CONDUCT AN INQUIRY IN THE WAY HE CONSIDERED IT CORRECT. RELYING ON SECTI ONS 142(1) AND 143(2), THE LD. AR SUBMITTED THAT IT IS THE AO WHO HAS TO C ONDUCT AN INQUIRY IN THE WAY HE FEELS LIKE. IT WAS FURTHER STATED THAT I T CANNOT BE EXPECTED OF THE AO TO EXAMINE EACH AND EVERY DETAIL CONCERNING THE RETURN OF INCOME. WHEN THE LEGISLATURE HAS EMPOWERED THE AO TO CONDUCT THE INQUIRY ON THE POINTS WHICH THE AO MAY REQUIRE, THE LD. AR ARGUED, THAT THE LD. CIT CANNOT BE ALLOWED TO INTERFERE BY IMPOS ING HIS OPINION UPON THE AO. 18.B. SECTION 142(1) UNEQUIVOCALLY PROVIDES THAT FOR THE PURPOSES OF MAKING AN ASSESSMENT UNDER THIS ACT, THE AO MAY SER VE A NOTICE ON ANY PERSON WHO HAS MADE A RETURN REQUIRING HIM TO PRODU CE OR CAUSE TO BE PRODUCED SUCH ACCOUNTS AND DOCUMENTS AS HE MAY REQU IRE OR: TO FURNISH IN WRITING AND VERIFIED IN THE PRESCRIBED MANNER IN FORMATION IN SUCH FORMAT AND ON SUCH POINTS OR MATTERS (INCLUDING A STATEMENT OF ALL ASSETS AND LIABILITIES OF THE ASSESSEE WHETHER INCLUDED IN THE ACCOUNTS OR NOT) AS THE AO MAY REQUIRE. LANGUAGE OF SECTION 143(2) A LSO GIVES DISCRETION ITA NO.1104/KOL/2014 (M/S SUBHALAKSHMI VANIJYA PVT. L TD.) & 18 OTHER APPEALS OF DIFFERENT ASSESSEES 76 TO THE AO TO SERVE ON THE ASSESSEE A NOTICE SPECIFY ING PARTICULARS OF CLAIM OF LOSS, EXEMPTION, DEDUCTION, ALLOWANCE OR R ELIEF AND REQUIRE HIM, `WHERE HE HAS REASON TO BELIEVE THAT ANY CLAIM OF L OSS, EXEMPTION, DEDUCTION, ALLOWANCE OR RELIEF MADE IN THE RETURN I S INADMISSIBLE. A CAREFUL PERUSAL OF THESE PROVISIONS UNVEILS THAT IT IS THE PREROGATIVE OF THE AO TO REQUIRE THE INFORMATION ON SUCH POINTS OR MA TTERS AS HE MAY REQUIRE. WE ARE HIGHLIGHTING THE EXPRESSION ON SU CH POINTS OR MATTERS USED IN SECTION 142(1) TO BRING OUT THAT IT IS THE PRIVILEGE OF THE AO, WHICH SHOULD PREVAIL IN REQUIRING THE ASSESSEE TO F URNISH INFORMATION ONLY ON SUCH POINTS OR MATTERS AS HE MAY REQUIRE. WE AGREE WITH THE LD. AR THAT ORDINARILY IT IS NOT POSSIBLE FOR THE AO TO INQUIRE INTO EACH AND EVERY ENTRY RECORDED IN THE BOOKS OF ACCOUNT OF THE ASSESSEE. HE HAS TO EXERCISE HIS ACUMEN IN EXTRACTING OUT THE RELEVANT POINTS OR MATTERS ON WHICH HE WANTS TO CONCENTRATE. BUT, WHAT IS IMPORTA NT IN THIS REGARD IS THAT THE OPERATION OF SECTIONS 142(1)/143(2) OF THE ACT COMES TO AN END WHEN AN ASSESSMENT IS COMPLETED AFTER EXAMINING SUC H POINT OR MATTERS WHICH THE AO FEELS TO INQUIRE BEFORE FINALIZING THE ASSESSMENT. IT IS ONLY ITA NO.1104/KOL/2014 (M/S SUBHALAKSHMI VANIJYA PVT. L TD.) & 18 OTHER APPEALS OF DIFFERENT ASSESSEES 77 THEREAFTER THAT THE REVISIONAL POWERS OF THE CIT U/ S 263 CAN COME INTO PLAY FOR ASCERTAINING IF THE AO EXAMINED ALL THE RE LEVANT POINTS, WHICH OUGHT TO HAVE BEEN EXAMINED. IF THE CIT, ON EXAMIN ATION OF RECORDS OF ASSESSMENT, COMES TO THE CONCLUSION THAT THE AO FAI LED TO ENQUIRE INTO CERTAIN OTHER RELEVANT ASPECTS WHICH, IN FACT, NECE SSITATED THOROUGH INVESTIGATION, THEN HE HAS ALL THE POWER TO REVISE THE ASSESSMENT ORDER. TO ARGUE THAT ONCE THE AO, AS PER HIS WISDOM, HAS I NQUIRED INTO CERTAIN ASPECTS OF ASSESSMENT WHICH HE CONSIDERED RELEVANT AND, THEREAFTER, CIT CANNOT INTERVENE, IS WHOLLY UNTENABLE. IF THIS ARG UMENT IS TAKEN TO ITS LOGICAL CONCLUSION, THEN IT WOULD MEAN OBLITERATING THE PROVISIONS OF SECTION 263 FROM THE STATUTE. WE ARE EXTANTLY NOT C ONCERNED WITH A SITUATION IN WHICH THE CIT IS DIRECTING THE AO TO M AKE ASSESSMENT IN A PARTICULAR WAY, WHEN THE ASSESSMENT PROCEEDINGS AR E UNDERWAY. RATHER, THE ASSESSMENT ALREADY STANDS FINALIZED AND NOW THE CIT IS EXAMINING WHETHER THE AO PROPERLY EXAMINED THE FACTS OF THE C ASE. IN SUCH CIRCUMSTANCES, IT IS IMPERMISSIBLE TO HAVE A RECOUR SE TO THE PROVISIONS OF SECTION 142(1) AND 143(2) FOR DEMOLISHING THE ORDER U/S 263 OF THE ACT. ITA NO.1104/KOL/2014 (M/S SUBHALAKSHMI VANIJYA PVT. L TD.) & 18 OTHER APPEALS OF DIFFERENT ASSESSEES 78 WE, THEREFORE, REFUSE TO UPHOLD THIS CONTENTION AS A REASON FOR SETTING ASIDE THE ORDER PASSED U/S 263 OF THE ACT. III) WHETHER INADEQUATE INQUIRY CONDUCTED BY THE AO EMPOWERS THE CIT TO REVISE THE ASSESSMENT ORDER? 19.A. NOW WE TAKE UP THE ARGUMENT OF THE LD. AR THAT SINCE THE AO CONDUCTED ENQUIRY, WHICH MIGHT NOT HAVE BEEN ADEQUA TE IN THE OPINION OF THE LD. CIT, THERE CAN BE NO REVISION BECAUSE TH E POWER U/S 263 CAN BE INVOKED ONLY IN CASES OF LACK OF INQUIRY AND NOT CO NDUCTING INADEQUATE INQUIRY. WE PARTLY AGREE WITH THE CONTENTION THAT W HERE AN ENQUIRY IS CONDUCTED BY THE AO AND HE GETS SATISFIED WITH THE GENUINENESS OF THE TRANSACTION, THEN THE CIT CANNOT INTERVENE THROUGH REVISION FOR COMING TO A CONCLUSION THAT THE ASSESSMENT ORDER PASSED BY THE AO WAS ERRONEOUS AND PREJUDICIAL TO THE INTERESTS OF THE R EVENUE. THE CRUX OF THE MATTER IS THAT THE AO SHOULD CONDUCT ENQUIRY TO SATISFY HIMSELF ABOUT THE GENUINENESS OF TRANSACTIONS. SCOPE OF THE TERM `ENQUIRY CAN BE DIVERSE IN DIFFERENT CIRCUMSTANCES. THERE CANNOT B E STRAITJACKET FORMULA TO POSITIVELY CONCLUDE AS TO CONDUCTING OR NON-COND UCTING OF `ENQUIRY ITA NO.1104/KOL/2014 (M/S SUBHALAKSHMI VANIJYA PVT. L TD.) & 18 OTHER APPEALS OF DIFFERENT ASSESSEES 79 BY THE AO. WHILE, IN SOME CASES, COLLECTION OF NEC ESSARY MATERIAL BY THE AO MAY LEAD TO AN INFERENCE ABOUT CONDUCTING `E NQUIRY, IN OTHERS, MERE OBTAINING AND PLACING THE DOCUMENTS ON RECORD MAY NOT BE EQUALIZED WITH CONDUCTING AN ENQUIRY. IT DEPENDS ON THE FACTS AND CIRCUMSTANCES OF EACH CASE. WHERE THE FACTS ARE JUS T ORDINARY AND PRIMA FACIE THERE IS NOTHING UNTOWARD THE RECORDED TRANSACTION , IN SUCH CIRCUMSTANCES, THE OBTAINING OF THE DOCUMENTS AND T HE APPLICATION OF MIND THEREON, WITHOUT A FURTHER OUTSIDE ENQUIRY, M AY MEAN THAT THE AO DID CONDUCT ENQUIRY, LEAVING THE QUESTION OPEN AS T O WHETHER IT WAS A PROPER OR AN IMPROPER ENQUIRY. BUT, WHERE THE FACT UAL SCENARIO OF A CASE PRIMA FACIE INDICATES ABNORMALITIES AND CRY FOR LOOKING DEEP I NTO IT, THEN A MERE COLLECTION OF DOCUMENTS CANNOT BE HELD AS CO NDUCTING ENQUIRY, LEAVE ASIDE, ADEQUATE OR INADEQUATE. IN SUCH LATER CASES, ONLY WHEN THE AO, AFTER COLLECTION OF THE INITIAL DOCUMENTS, EMBA RKS UPON FURTHER INVESTIGATION, THAT WE CAN SAY THAT HE INITIATED EN QUIRY. WHERE THE FACTS OF A PARTICULAR TRANSACTION CRY HOARSE ABOUT ITS NO N-GENUINENESS AND EVEN A CASUAL LOOK AT SUCH FACTS, PRIMA FACIE , DIVULGES FOUL PLAY, THEN THE ITA NO.1104/KOL/2014 (M/S SUBHALAKSHMI VANIJYA PVT. L TD.) & 18 OTHER APPEALS OF DIFFERENT ASSESSEES 80 ALARM BELL MUST RING IN THE MIND OF THE AO FOR MAKI NG FURTHER EXAMINATION. COLLECTION OF PAPERS ON RECORD IN SUCH CIRCUMSTANCES CANNOT BE CONSTRUED AS CONDUCTING A PROPER ENQUIRY. IF IN SUCH CIRCUMSTANCES, THE AO SIMPLY GATHERS DOCUMENTS AND KEEPS THEM ON RECORD, THEN SUCH NOMINAL ENQUIRY FALLS WITHIN THE OVERALL CATEGORY OF `NO ENQUIRY BECAUSE OF THE INACTION ON THE PART O F THE AO TO READ A WRITING ON THE WALL. THE FACTS AND CIRCUMSTANCES AN D ARGUMENTS BY THE RIVAL PARTIES IN OTHER CASES IN THIS BATCH OF APPEA LS ARE SIMILAR. 19.B. AT THIS JUNCTURE, WE WOULD LIKE TO DEAL WIT H THE JUDGMENT OF THE HONBLE JURISDICTIONAL HIGH COURT IN THE CASE OF MAITHAN INTERNATIONAL (SUPRA). THE ASSESSEE IN THAT CASE OBTAINED LOANS AGGREGATI NG TO RS.1.60 CRORE FROM SIX PRIVATE LIMITED COMPANIES RANGING BE TWEEN RS.7 LAC TO RS.1.10 CRORE. THESE COMPANIES HAD FILED THEIR RET URNS WITH NOMINAL INCOME. THE AO MENTIONED IN THE ASSESSMENT ORDER T HAT INSPECTOR WAS DEPUTED TO VERIFY FRESH LOANS RECEIVED DURING THE Y EAR. THE INSPECTOR VERIFIED SUCH LOANS AND GAVE A POSITIVE REPORT. KE EPING SUCH REPORT ON RECORD, THE AO ACCEPTED THE GENUINENESS OF THE TRAN SACTIONS. THE CIT ITA NO.1104/KOL/2014 (M/S SUBHALAKSHMI VANIJYA PVT. L TD.) & 18 OTHER APPEALS OF DIFFERENT ASSESSEES 81 INVOKED SECTION 263 BY OBSERVING THAT THE REPORT GI VEN BY THE INSPECTOR WAS VERY ELEMENTARY AND SIMPLY MENTIONED THAT HE HA D VERIFIED BANK PASSBOOKS, PROFIT & LOSS ACCOUNT AND BALANCE SHEETS OF THESE COMPANIES. IN NONE OF THE REPORTS, HE HAD COMMENTED ON THE ISS UE OF CREDIT WORTHINESS OF THE PARTIES. THE CIT OPINED THAT THE AO WAS REQUIRED TO MAKE PROPER INVESTIGATION TO DETERMINE WHETHER THE LOANS WERE REALLY MADE BY THE THIRD PARTIES OR THEY HAD COME OUT OF T HE SOURCES OF THE ASSESSEE HIMSELF. THE TRIBUNAL SET ASIDE THE ORDER U/S 263 OF THE ACT BY OBSERVING THAT THE AO DID CONDUCT ENQUIRY AND: IF THERE IS AN ENQUIRY, EVEN INADEQUATE, THAT WOULD NOT BY ITSELF GIVE OCCA SION TO THE LD. CIT TO PASS ORDER U/S 263 OF THE ACT. SETTING ASIDE THE ORDER PASSED BY THE TRIBUNAL, THE HONBLE JURISDICTIONAL HIGH COURT HAS LAID DOWN THAT : CIT HAD REASONS TO HOLD THAT CREDIT WORTHINESS OF THE ALLEGED LENDERS WAS NOT ENQUIRED INTO. IT FURTHER WENT ON TO HOLD THAT A MERE EXAMINATION OF THE BANK PASSBOOK, PROFIT & LOSS ACC OUNT AND BALANCE SHEET IS NOT ENOUGH. WHEN THE REQUISITE ENQUIRY WA S NOT MADE, THE HONBLE HIGH COURT HELD THAT, THE ORDER WAS TO BE C ONSIDERED AS ITA NO.1104/KOL/2014 (M/S SUBHALAKSHMI VANIJYA PVT. L TD.) & 18 OTHER APPEALS OF DIFFERENT ASSESSEES 82 ERRONEOUS AND PREJUDICIAL TO THE INTERESTS OF THE R EVENUE. IT ALSO SET ASIDE THE VIEW OF THE TRIBUNAL ON INADEQUATE ENQUIR Y BY HOLDING THAT: IF THE RELEVANT ENQUIRY WAS NOT MADE, IT MAY IN APPROP RIATE CASES AMOUNT TO NO ENQUIRY AND MAY ALSO BE A CASE OF NON-APPLICA TION OF MIND. IT FURTHER OBSERVED THAT THE QUESTION OF INADEQUATE EN QUIRY SHOULD BE UNDERSTOOD IN ITS PROPER PERSPECTIVE AND: IF IT CA N BE SHOWN THAT THE INADEQUATE ENQUIRY LED THE AO OR MAY HAVE LED INTO ASSUMPTION OF INCORRECT FACTS, THAT COULD MAKE THE ORDER ERRONEOU S AND PREJUDICIAL TO THE INTERESTS OF THE REVENUE. SETTING A BAD TREND HAS ALSO BEEN HELD TO BE PREJUDICIAL TO THE REVENUE. 19.C. WHEN WE COMPARATIVELY CONSIDER THE FACTS O F THE INSTANT CASE VIS- A-VIS THOSE OF MAITHAN INTERNATIONAL (SUPRA), IT CAN BE SEEN THAT THE FACTS UNDER CONSIDERATION ARE ON A MUCH WEAKER FOOTING. I N THE PRESENT CASE, THE AO OBTAINED CONFIRMATIONS AND COPIES OF BANK ST ATEMENTS, ETC., FROM SOME OF THE SHAREHOLDERS AND GOT HIMSELF SATISFIED, WHEREAS IN THE CASE OF MAITHEN INTERNATIONAL , AN INSPECTOR WAS ALSO DEPUTED TO CONDUCT A ITA NO.1104/KOL/2014 (M/S SUBHALAKSHMI VANIJYA PVT. L TD.) & 18 OTHER APPEALS OF DIFFERENT ASSESSEES 83 FURTHER ENQUIRY IN ADDITION TO THE COLLECTION OF DO CUMENTS ETC. AS HAS BEEN DONE IN THE INSTANT CASES. 19.D. DECISION OF THE HONBLE FULL BENCH OF THE GUWAHAT HIGH COURT IN THE CASE OF JAWAHAR BHATTACHARJEE REPORTED IN (2012) 341 ITR 43 4 (GAU.) (FB) IS ALSO AN AUTHORITY FOR THE PROPOSITION THAT : NOT HOLDING SUCH ENQUIRY AS IS NORMAL AND NOT APPLYING MIND TO THE RELEVANT MATERIAL IN MAKING AN ASSESSMENT WOULD CERTAINLY BE ERRONEOUS ASSESSMENT WARRANTING EXERCISE OF REVISIONAL JURISD ICTION . 19.E. TESTING THE FACTS OF THE PRESENT CASE ON TH E TOUCHSTONE OF THE RATIO DECIDENDI OF THE HONBLE JURISDICTIONAL HIGH COURT IN MAITHAN INTERNATIONAL (SUPRA) , WE HAVE NO HESITATION IN HOLDING THAT THE PRESENT CASE IS A GLARING EXAMPLE OF NOT MAKING RELEVANT EN QUIRY, WHICH AMOUNTS TO `NO ENQUIRY AND HENCE IT BECOMES A CASE OF NON-APPLICATION OF MIND BY THE AO. THIS ARGUMENT, THEREFORE, FAILS. IV) WHETHER THE ORDER OF THE CIT IS BASED ON IRRE LEVANT CONSIDERATION AND FURTHER WAS HE SUPPOSED TO POINT OUT ITA NO.1104/KOL/2014 (M/S SUBHALAKSHMI VANIJYA PVT. L TD.) & 18 OTHER APPEALS OF DIFFERENT ASSESSEES 84 SPECIFICALLY WHERE THE AO WENT WRONG IN NOT PROPERL Y EXAMINING THE ISSUE OF SHARE CAPITAL? 20.A. THE NEXT PLANK OF THE MARATHON SUBMISSIONS O F THE LD AR WAS THAT THE LD. CIT PASSED ORDER BASED ON IRRELEVANT MATERI AL, SURMISES AND CONJECTURES AND WAS HENCE UNSUSTAINABLE IN LAW. HE SUBMITTED THAT IT WAS THE ORDER OF THE LD. CIT WHICH WAS PERVERSE AND NOT THAT OF THE AO. RELYING ON THE JUDGMENT OF THE HONBLE SUPREME COUR T IN THE CASE OF LAL CHAND BHAGAT AMBIKA RAM VS. CIT (1959) 37 ITR 2 88 (SC) , THE LD. AR ARGUED THAT THE LD. CIT ACTED WITHOUT ANY EVIDEN CE FOR COMING TO CONCLUSION THAT THE SHAREHOLDERS WERE NOT GENUINE. 20.B. WE ARE UNABLE TO ACCEPT THE CONTENTION OF THE LD. AR. IT CAN BE SEEN FROM THE FACTS RECORDED IN THE IMPUGNED ORDERS THAT IT HAS BEEN PROPERLY BROUGHT OUT THAT THE ASSESSEE COMPANY ALON G WITH HUNDREDS OF SUCH OTHER COMPANIES WERE PAPER COMPANIES FLOATED B Y CERTAIN OPERATORS WITH THE AIM OF HELPING IN CONVERTING UNACCOUNTED M ONEY INTO ACCOUNTED MONEY. WE HAVE ALSO NOTED ABOVE THAT THER E SEVERAL HUNDRED APPEALS PENDING BEFORE THE TRIBUNAL IN ALL OF WHICH THE SAME MODUS ITA NO.1104/KOL/2014 (M/S SUBHALAKSHMI VANIJYA PVT. L TD.) & 18 OTHER APPEALS OF DIFFERENT ASSESSEES 85 OPERANDI HAS BEEN ADOPTED BY ISSUING SHARES AT HUGE PREMIUM WITH NO SUBSTANTIAL BUSINESS ACTIVITY AND, THEREAFTER, INVE STING THE RECEIPT OF SUCH SHARE CAPITAL WITH PREMIUM IN OTHER PAPER COMPANIES AGAIN AT HUGE PREMIUM AND SUCH LATTER COMPANIES BEING ALSO NOT UN DERTAKING ANY WORTHWHILE BUSINESS ACTIVITY. THE FURTHER FACT THAT SHAREHOLDERS OF ONE COMPANY ARE INVESTEE IN OTHER COMPANIES SO ON AND S O FORTH ALSO CASTS GREAT DOUBT OVER THE GENUINENESS OF THE TRANSACTION S. ONE CASE CANNOT BE SEEN IN ISOLATION IN VIEW OF THE TOTALITY OF FACTS AND CIRCUMSTANCES AS IS PREVAILING IN SUCH CASES. IT IS WHOLLY INCORRECT T O SAY THAT THE ACTION OF THE LD. CIT, WHEN THE WEB OF FICTITIOUS COMPANIES I NVOLVED IN SUCH DUBIOUS PRACTICE WAS UNEARTHED, WAS BASED ON SURMIS ES AND CONJECTURES. THE JUDGMENT IN THE CASE OF LAL CHAND BHAGAT AMBIKA RAM (SUPRA) IS BASED ON THE FACTS IN WHICH THERE WAS NO EVIDENCE O F THAT ASSESSEE INVOLVED INTO SMUGGLING. ON THE CONTRARY, WE ARE C ONFRONTED WITH A SITUATION IN WHICH THE CASE RECORDS OF THE ASSESSEE DIVULGE THAT IT ISSUED SHARES AT HUGE UNDERSERVING PREMIUM COUPLED WITH TH E FACT THAT IT ALSO MADE INVESTMENTS IN THE SHARES OF OTHER COMPANIES A T MUCH HIGHER ITA NO.1104/KOL/2014 (M/S SUBHALAKSHMI VANIJYA PVT. L TD.) & 18 OTHER APPEALS OF DIFFERENT ASSESSEES 86 PRICES, WITHOUT ANY JUSTIFICATION AND FURTHER THE S HAREHOLDER COMPANIES OF THE ASSESSEE COMPANY ARE DIRECTLY OR THROUGH ITS DIRECTORS, SIMULTANEOUSLY INVESTEE COMPANIES IN OTHER SUCH COM PANIES, ALL OF WHICH HAVE NO MEANINGFUL BUSINESS ACTIVITY. IT IS THE SAME PATTERN WHICH HAS BEEN ADOPTED BY ALL THESE COMPANIES, OF W HICH THE ASSESSEE IS A PART. IT WOULD BE UTTERLY ERRONEOUS TO HOLD THAT IN THE FACTS AND CIRCUMSTANCES OF THE ASSESSEE COMPANY, THERE WAS NO MATERIAL BEFORE THE LD. CIT TO INVOKE JURISDICTION U/S 263. 20.C. THE ARGUMENT OF THE LD. AR THAT ANY COMPAN Y IS ENTITLED TO ISSUE SHARES AT ANY PREMIUM WHICH IT LIKES AND THAT THE C OMPANIES ACT DOES NOT PROHIBIT ISSUING SHARES AT PREMIUM, DOES NOT I N OUR CONSIDERED OPINION, BRING ANY CHANGE IN OUR CONCLUSION IN BACK GROUND OF THE FACTUAL POSITION AS IS PREVAILING BEFORE US. WE AGREE THAT ANY COMPANY CAN ISSUE SHARES AT ANY AMOUNT OF PREMIUM. IT IS ONLY WHEN THE SHARES ARE GENUINELY ISSUED AT A CERTAIN AMOUNT OF PREMIUM THA T THERE CANNOT BE ANY INQUIRY. IF, HOWEVER, THE STRIKING REALITY OF A SITUATION IS VISIBLE EVEN TO CLOSED EYES, THAT THE SHARES WERE NOT GENUINELY ISSUED AT THE GIVEN ITA NO.1104/KOL/2014 (M/S SUBHALAKSHMI VANIJYA PVT. L TD.) & 18 OTHER APPEALS OF DIFFERENT ASSESSEES 87 PREMIUM, THEN THERE CAN BE NO FETTERS ON THE POWERS OF THE AUTHORITIES TO EXAMINE THE GENUINENESS OF THE PERSONS SUBSCRIBING TO SHARE CAPITAL. A LINE OF DISTINCTION SHOULD BE DRAWN BETWEEN THE CAS ES WHERE SHARES ARE GENUINELY ISSUED AT PREMIUM ON ONE HAND AND THE CAS ES WHERE THE SHARES ARE NOT GENUINELY ISSUED AT PREMIUM OR THERE IS SOM E FOUL PLAY IN THE ISSUE OF SHARES AT PREMIUM ON THE OTHER. IN SUCH LA TTER SITUATIONS, THE AUTHORITIES CANNOT BE DEBARRED FROM THOROUGHLY EXAM INING THE ASPECT OF SHARE PREMIUM FROM ALL THE POSSIBLE ANGLES. IF, ON SUCH EXAMINATION, IT IS FOUND THAT THE TRANSACTION OF ISSUE OF SHARES AT PR EMIUM WAS NOT GENUINE, THEN THE LAW WILL HAVE TO TAKE ITS OWN COURSE. 20.D. ANOTHER CONTENTION WAS PUT FORTH BY THE LD. AR THAT IF THE VIEW POINT OF THE DEPARTMENT WAS PRESUMED TO BE CORRECT FOR A MOMENT THAT IT WAS A CASE OF CIRCULAR TRANSACTIONS, MEANING THEREB Y, THAT ONE AMOUNT OF MONEY HAS PASSED THROUGH SEVERAL COMPANIES, THEN TH E ADDITION, IF ANY, CAN BE MADE ONLY THE HANDS OF FIRST COMPANY AND NOT THE OTHERS, THROUGH WHOM THE MONEY CAME INTO ROTATION. IT WAS ARGUED TH AT THE LD. CIT WAS ITA NO.1104/KOL/2014 (M/S SUBHALAKSHMI VANIJYA PVT. L TD.) & 18 OTHER APPEALS OF DIFFERENT ASSESSEES 88 NOT JUSTIFIED IN THIS BACKDROP OF FACTS IN DIRECTIN G THE AOS OF ALL THE COMPANIES TO INVESTIGATE THE GENUINENESS OF CREDIT IN ALL THE COMPANIES. 20.E. THIS ARGUMENT, THOUGH LOOKS ATTRACTIVE AT THE FIRST FLUSH, BUT DOES NOT STAND SCRUTINY IN DEPTH. IN ALL THESE CASES UN DER CONSIDERATION, THE ISSUE IS ABOUT THE GENUINENESS OF SHARE CAPITAL CRE DITED IN THE BOOKS OF ACCOUNTS OF SUCH COMPANIES. SECTION 68 UNEQUIVOCAL LY PROVIDES THAT : `WHERE ANY SUM IS FOUND CREDITED IN THE BOOKS OF A N ASSESSEE MAINTAINED FOR ANY PREVIOUS YEAR, AND THE ASSESSEE OFFERS NO EXPLANATION ABOUT THE NATURE AND SOURCE THEREOF OR THE EXPLANAT ION OFFERED BY HIM IS NOT, IN THE OPINION OF THE ASSESSING OFFICER, SATIS FACTORY, THE SUM SO CREDITED MAY BE CHARGED TO INCOME-TAX AS THE INCOME OF THE ASSESSEE OF THAT PREVIOUS YEAR. THE CRUX OF THE MATTER IS THA T IF ANY MONEY IS CREDITED IN THE BOOKS OF ACCOUNTS OF A COMPANY IN T HE FORM OF SHARE CAPITAL AND THE ASSESSEE FAILS TO SATISFY THE AO, T HEN THE SUM SO CREDITED HAS TO BE CHARGED TO TAX U/S 68 OF THE ACT. THE VER Y FACT OF SUCH SHARE CAPITAL HAVING BEEN CREDITED IN THE BOOKS OF ACCOUN T OF SEVERAL ITA NO.1104/KOL/2014 (M/S SUBHALAKSHMI VANIJYA PVT. L TD.) & 18 OTHER APPEALS OF DIFFERENT ASSESSEES 89 COMPANIES, IS ENOUGH TO CONSIDER ALL SUCH CASES WIT HIN THE PURVIEW OF SECTION 68. 20.F. IT WAS THEN ARGUED BY THE LD. AR, BY RELYI NG ON CERTAIN DECISIONS, THAT BEFORE BRANDING THE ASSESSMENT ORDER AS ERRONE OUS AND PREJUDICIAL TO THE INTERESTS OF THE REVENUE, IT WAS INCUMBENT UPON THE CIT TO EXPRESSLY SHOW SOME MISTAKE IN THE ASSESSMENT ORDER MAKING IT ERRONEOUS AND PREJUDICIAL TO THE INTEREST OF THE REVENUE. A MERE MENTION IN THE ORDER OF THE CIT THAT PROPER ENQUIRY WAS NOT CONDUCTED, IN T HE OPINION OF THE LD. AR, WAS AN INCORRECT APPRECIATION OF THE PROVISIONS OF SECTION 263. SO LONG AS THERE IS AN EVIDENCE ON THE RECORD OF THE A O ABOUT THE CONDUCTING OF A PROPER ENQUIRY, THE LD. AR ARGUED, THAT THE LD. CIT CANNOT INVOKE THE PROVISIONS OF SECTION 263. THE SU M AND SUBSTANCE OF THE SUBMISSION WAS THAT BEFORE ASSUMING JURISDICTIO N U/S 263, THE LD. CIT WAS SUPPOSED TO POINT OUT WHERE THE AO WENT WRONG. SINCE THE IMPUGNED ORDER OF THE LD. CIT WAS SILENT ON THIS AS PECT, THE LD. AR ARGUED THAT THE SAME BE SET ASIDE. ITA NO.1104/KOL/2014 (M/S SUBHALAKSHMI VANIJYA PVT. L TD.) & 18 OTHER APPEALS OF DIFFERENT ASSESSEES 90 20.G. WE AGREE WITH THE PROPOSITION ADVANCED BY THE LD. AR, BUT IN OUR CONSIDERED OPINION, THE SAME IS NOT APPLICABLE TO T HE FACTS OF THE INSTANT CASE. SUCH A PROPOSITION APPLIES WHERE THE AO HAS M ADE PROPER ENQUIRY AND STILL COMES TO A WRONG CONCLUSION, WHICH RENDER S THE ASSESSMENT ORDER ERRONEOUS AND PREJUDICIAL TO THE INTEREST OF THE REVENUE. IN SUCH CIRCUMSTANCES, IT BECOMES THE DUTY OF THE CIT TO EX PRESSLY POINT OUT WHERE THE AO WENT WRONG ON MERITS. BUT IN A CASE, WHERE NO ENQUIRY HAS BEEN CONDUCTED AT ALL OR THE SO-CALLED ENQUIRY CONDUCTED BY THE AO IS AS GOOD AS NO ENQUIRY, AS IS THE CASE UNDER CONS IDERATION, IN SUCH CIRCUMSTANCES, THE CIT SIMPLY NEEDS TO POINT OUT TH OSE RELEVANT ASPECTS OF ASSESSMENT, WHICH THE AO LOST SIGHT OF, BUT WERE REQUIRED TO BE PROPERLY PROBED. THIS DIFFERENCE, MAY IN CERTAIN C IRCUMSTANCES, BE APPRECIATED WITH THE HELP OF CONCLUSION DRAWN BY TH E CIT. WHEN HE EXPRESSLY SHOWS A PARTICULAR ASPECT OF AN ASSESSMEN T AS GOING WRONG ON MERITS, THE ORDER U/S 263 CANCELS THE ASSESSMENT OR DER ON THAT ASPECT. BUT WHERE, THE AO FAILS TO CONDUCT ENQUIRY, THE OBLIGAT ION OF THE CIT ENDS WITH SHOWING THAT SUCH AND SUCH ISSUES REQUIRED PRO PER INVESTIGATION AT ITA NO.1104/KOL/2014 (M/S SUBHALAKSHMI VANIJYA PVT. L TD.) & 18 OTHER APPEALS OF DIFFERENT ASSESSEES 91 THE END OF THE AO, WHICH HE FAILED TO DO. IN SUCH C ASES, THE ASSESSMENT ORDER IS SET ASIDE WITH THE DIRECTION TO THE AO FOR LOOKING INTO THE MATTER AFRESH AND THEN DECIDING THE ISSUE PROPERLY. THERE CAN BE NO WAY FOR THE CIT TO TELL ERRONEOUS APPROACH OF THE AO ON MERITS IN SUCH CIRCUMSTANCES BECAUSE THE VIEW OF THE AO ON MERITS IS NOT AVAILABLE. REQUIRING THE CIT TO INDICATE WHERE THE AO WENT WRO NG ON MERITS IN THE CASES OF NO ENQUIRY CASES, IS LIKE REQUIRING AN IMP OSSIBLE THING TO BE DONE. IT IS AXIOMATIC THAT THE LAW DOES NOT REQUIRE AN IMPOSSIBLE TO BE COMPLIED WITH. WE ARE REMINDED OF THE LEGAL MAXIM, ` LEX NEMINEM COGIT AD VANA SEU IMPOSSIBLIA , WHICH MEANS THAT THE LAW COMPELS NO ONE TO DO IMPOSSIBLE THINGS. WHEN WE APPROACH THE F ACTS OF THE CASES UNDER CONSIDERATION, IT IS OBVIOUS THAT THE EXTENT OF ENQUIRY CONDUCTED BY THE AO, BEING AS GOOD AS NO ENQUIRY, IS SUFFICIENT IN ITSELF TO EMPOWER THE CIT FOR INVOKING HIS JURISDICTION U/S 263. UND ER SUCH CIRCUMSTANCES, WE CANNOT CAST AN IMPOSSIBLE BURDEN ON THE CIT TO SHOW THE POSITIVE LEAKAGE OF INCOME IN CONCRETE TERMS, WHEN HE HAS S IMPLY SET ASIDE THE ASSESSMENT ORDER AND RESTORED THIS ASPECT OF THE AS SESSMENT TO THE FILE OF ITA NO.1104/KOL/2014 (M/S SUBHALAKSHMI VANIJYA PVT. L TD.) & 18 OTHER APPEALS OF DIFFERENT ASSESSEES 92 AO FOR MAKING A PROPER ENQUIRY AND THEN DECIDING. THIS ARGUMENT OF THE LD. AR, BEING DEVOID OF ANY MERITS, IS REJECTED . V) IF THE AO HAS TAKEN A POSSIBLE VIEW, CAN STILL T HE REVISION BE ORDERED? 21.A. THE LD. AR ARGUED THAT SECTION 263 CANNOT B E ARBITRARILY INVOKED WHERE THE AO HAS TAKEN ONE OF THE POSSIBLE VIEWS. HE BOLSTERED THIS CONTENTION WITH CERTAIN AUTHORITIES THAT POINT OUT THAT IF THE AO ADOPTS ONE POSSIBLE VIEW, WITH WHICH THE CIT IS NOT AGRE EABLE, THAT CANNOT BE CONSIDERED AS A CASE WARRANTING THE INVOCATION OF S ECTION 263. THE LD. AR INVITED OUR ATTENTION TOWARDS CERTAIN OTHER JUDG MENTS OF THE HONBLE JURISDICTIONAL HIGH COURT INCLUDING THE CASE OF CIT VS. ROSEBERRY MERCANTILE (P) LTD ., COPIES OF WHICH HAVE BEEN PLACED ON RECORD, IN WHICH IT HAS BEEN HELD THAT THE JUDGMENT IN THE CAS E OF LOVELY EXPORTS (SUPRA) IS APPLICABLE AND THE QUESTION OF SHARE CAPITAL CA NNOT BE EXAMINED IN THE HANDS OF THE ASSESSEE. IT WAS SUBM ITTED THAT EVEN THOUGH THERE ARE SOME JUDGMENTS HOLDING THE NON-APP LICATION OF THE JUDGMENT OF THE LOVELY EXPORTS (SUPRA) TO CLOSELY HELD COMPANIES, IT ITA NO.1104/KOL/2014 (M/S SUBHALAKSHMI VANIJYA PVT. L TD.) & 18 OTHER APPEALS OF DIFFERENT ASSESSEES 93 SHOWS THAT THE ISSUE IN QUESTION WAS DEBATABLE AND, AS SUCH, INCAPABLE OF BEING EXAMINED IN THE PROCEEDINGS U/S 263. RELY ING ON CIT VS. J.L. MORRISON (INDIA) LTD. (2014)366 ITR 0593 (CAL) , THE LD. AR STATED THAT ONCE THE AO HAS TAKEN A POSSIBLE VIEW, IT CANNOT BE SAID THAT VIEW TAKEN BY HIM WAS ERRONEOUS MAKING THE ASSESSMENT ORDER AM ENABLE TO REVISION. 21.B. TAKING INTO CONSIDERATION THE AMENDMENT BR OUGHT TO SECTION 68 BY THE FINANCE ACT, 2012, WE HAVE HELD IN THE PART (A) OF THIS ORDER THAT THE AO IS NOT ONLY EMPOWERED BUT DUTY BOUND TO MAKE AN ADDITION U/S 68 OF THE ACT ON ACCOUNT OF RECEIPT OF SHARE CAPITA L WITH OR WITHOUT PREMIUM EVEN IN THE PERIOD ANTERIOR TO THE A.Y. 201 3-14, IF THE ASSESSEE COMPANY FAILS TO PROVE IDENTITY AND CAPACITY OF THE SHAREHOLDERS IN ADDITION TO THE GENUINENESS OF THE TRANSACTION. 21.C. IT IS FURTHER INTERESTING TO NOTE THAT IN MAITHAN INTERNATIONAL (SUPRA) ALSO, THE APPELLANT ASSESSEE RELIED ON THE JUDGMENT IN THE CASE OF J.L. MORRISON (INDIA) LTD. (SUPRA) FOR CONTENDING THAT SINCE THE AO ON EXAMINATION OF THE MATERIAL BEFORE HIM HAS TAKEN A POSSIBLE VIEW, THEN ITA NO.1104/KOL/2014 (M/S SUBHALAKSHMI VANIJYA PVT. L TD.) & 18 OTHER APPEALS OF DIFFERENT ASSESSEES 94 THE CIT GETS PRECLUDED TO INVOKE SECTION 263. REPEL LING THIS CONTENTION, THE HONBLE HIGH COURT HAS HELD IN MAITHAN INTERNATIONAL (SUPRA) THAT : `THE JUDGMENT IN THE CASE OF J. L. MORRISON DOES NO T ASSIST THE ASSESSEE BECAUSE IN THAT CASE THE QUESTION WAS WHETHER THE R ECEIPT WAS A REVENUE RECEIPT OR A CAPITAL RECEIPT. THE ASSESSING OFFICER TREATED THE RECEIPT AS A CAPITAL RECEIPT WHICH THE DIVISION BENCH FOUND WAS A POSSIBLE VIEW. UNLIKE IN THE PRESENT CASE, NO FACTUAL ENQUIRY WAS NECESSARY IN THAT CASE. WHEN WE EXAMINE THE FACTS UNDER CONSIDERATION, IT IS OBVIOUS THAT WE ARE DEALING WITH A CASE IN WHICH NO MEANINGFUL E NQUIRY WAS CONDUCTED BY THE AO IN FINALIZING THE ASSESSMENT U/ S 143(3) READ WITH SECTION 147 AND WE HAVE BEFORE US THE ORDER PASSED BY THE CIT U/S 263 DIRECTING THE AO TO MAKE PROPER ENQUIRY QUA THE ISSUE OF SHARE CAPITAL ON HIGHLY UNREASONABLE PREMIUM. ONCE THE PROCEEDI NGS ARE THROWN OPEN BEFORE THE AO, THE ASSESSEE WILL HAVE FULL LIB ERTY TO ARGUE HIS CASE ON MERITS. THE ASSESSMENT ORDERS IN THE INSTANT CA SES HAVE BECOME ERRONEOUS AND PREJUDICIAL TO THE INTEREST OF THE RE VENUE ON THE VERY THRESHOLD OF NOT MAKING A PROPER EXAMINATION OF THE ISSUE OF SHARE ITA NO.1104/KOL/2014 (M/S SUBHALAKSHMI VANIJYA PVT. L TD.) & 18 OTHER APPEALS OF DIFFERENT ASSESSEES 95 CAPITAL AT HUGE PREMIUM BY THE AO. THIS FACTOR ALO NE RENDERS THE ASSESSMENT ORDER OPEN TO REVISION U/S 263. 21.D. WE ARE REMINDED OF THE JUDGMENT OF THE HON BLE SUPREME COURT IN MALABAR INDUSTRIAL COMPANY LTD. VS. CIT (2000) 243 ITR 83 (SC), IN WHICH IT HAS BEEN HELD THAT NON-APPLICATION OF MIND BY THE AO MAKES THE ORDER ERRONEOUS AND PREJUDICIAL TO THE INTEREST S OF THE REVENUE. AN ORDER IS SAID TO BE ERRONEOUS WHEN IT DOES NOT CONF ORM TO THE LAW OR PROCEEDS ON INCORRECT ASSUMPTION OF FACTS. AN ORDE R IS SAID TO BE PREJUDICIAL TO THE INTERESTS OF THE REVENUE NOT ONL Y WHERE THE DUE TAX HAS NOT COME TO THE COFFERS OF THE EXCHEQUER, BUT, ALSO WHERE BAD PRECEDENT IS SET BY THE AO. IN OTHER WORDS, THE EXPRESSION PREJUDICIAL TO THE INTERESTS OF THE REVENUE NEEDS TO BE VIEWED IN A B ROADER SENSE AND CANNOT BE CONFINED TO ITS NARROW MEANING OF NON-REA LIZATION OF THE DUE TAX ONLY. IT FURTHER EXPLAINED THE AMBIT OF THE EX PRESSION PREJUDICIAL TO THE INTERESTS OF THE REVENUE BY LAYING DOWN THAT I T: IS NOT AN EXPRESSION OF ART AND IS NOT DEFINED IN THE ACT. UNDERSTOOD I N ITS ORDINARY MEANING, IT IS OF WIDE IMPORT AND IS NOT CONFINED TO LOSS OF TAX. THE HONBLE ITA NO.1104/KOL/2014 (M/S SUBHALAKSHMI VANIJYA PVT. L TD.) & 18 OTHER APPEALS OF DIFFERENT ASSESSEES 96 JURISDICTIONAL HIGH COURT IN MAITHAN INTERNATIONAL (SUPRA) HAS ALSO HELD THAT: SETTING A BAD TREND IS ALSO PREJUDICIAL TO T HE REVENUE. THE FACTS OF THE INSTANT CASES SPEAK VOLUMES OF THE BAD TREND SE T UP BY THE AO IN NOT CONDUCTING PROPER ENQUIRIES IN HUNDREDS OF SUCH CAS ES, WHICH IN OUR CONSIDERED OPINION HAVE BEEN RIGHTLY SET ASIDE BY T HE CITS U/S 263 OF THE ACT. 21.E. THE HONBLE DELHI HIGH COURT IN GEE VEE ENTERPRISES VS. ADDL. CIT AND OTHERS (1975) 99 ITR 375 (DEL) , WAS CONFRONTED WITH THE FACTS IN WHICH THAT ASSESSEE WAS INCORPORATED WITH THE OB JECT OF ACQUIRING LOAN AND MAKING CONSTRUCTION. IT PURCHASED SOME BUNGALO W AFTER BORROWING LOANS AS ITS SHARE CAPITAL WAS VERY LIMITED. SOME OF THE DIRECTORS AND SHAREHOLDERS OF THAT ASSESSEE COMPANY ENTERED INTO PARTNERSHIP. AN AGREEMENT WAS ENTERED INTO BETWEEN TWO SISTER CONCE RNS. THE PARTNERSHIP WAS TO COMPLETE A MULTI-STORIED BUILDIN G ON THE PLOT AFTER TAKING ADVANCES FROM THE LICENSEE TO WHOM FLATS IN THE BUILDING WERE TO BE ALLOTTED. THE PARTNER WAS TO KEEP 90% OF ITS MO NEY AND PAY 10% OF IT TO THE COMPANY AS CONSIDERATION FOR THIS AGREEMENT. IN VIEW OF THE 10% ITA NO.1104/KOL/2014 (M/S SUBHALAKSHMI VANIJYA PVT. L TD.) & 18 OTHER APPEALS OF DIFFERENT ASSESSEES 97 OF THE MONEY SO RECEIVED, THE COMPANY WAS TO ISSUE SHARES TO LICENSEES WHO WERE TO TAKE UP THE FLATS. THE ITO MADE THE ASS ESSMENTS OF THE COMPANY AND THE FIRM ON THAT BASIS APPARENTLY WITHO UT ASCERTAINING THE TRUTH OF THE FACTS. THEREAFTER, REVISION WAS DONE BY THE CIT AND THE MATTER WENT BEFORE THE HONBLE DELHI HIGH COURT. T HE ASSESSEE CONTENDED THAT THE ITO HAD MADE THE ENQUIRIES AND W AS SATISFIED ABOUT THE TRUTH OF THE FACTS AND HENCE REVISION WAS NOT M AINTAINABLE. REPELLING THE CONTENTION ADVANCED ON BEHALF OF THE ASSESSEE, IT WAS HELD THAT THE: CIT WAS JUSTIFIED IN EXERCISING HIS REVISIONAL JUR ISDICTION ON THE GROUND THAT THE ITO HAD NOT MADE SUFFICIENT ENQUIRIES BEFORE GRANTING REGISTRATION TO THE FIRM AND IT WAS NOT NECESSARY FOR THE CIT TO HAVE HIMSELF MADE ENQUIRIES BEFORE CANCELLING ASSESSMENT . IN OUR CONSIDERED OPINION, THIS JUDGMENT IS AN ANSWER TO T HE CONTENTION PUT FORTH ON BEHALF OF THE ASSESSEE THAT THE CIT MUST I NITIALLY INDICATE THE MISTAKE IN THE ASSESSMENT ORDER ON MERITS BY MAKING PROPER ENQUIRY AT HIS END BEFORE CANCELLING ASSESSMENT UNDER SECTION 263. THIS JUDGMENT MAKES IT PALPABLE THAT THE VERY FACT THAT THE ITO HAD NOT MADE SUFFICIENT ITA NO.1104/KOL/2014 (M/S SUBHALAKSHMI VANIJYA PVT. L TD.) & 18 OTHER APPEALS OF DIFFERENT ASSESSEES 98 ENQUIRIES BEFORE GRANTING REGISTRATION TO THE FIRM WAS CONSIDERED AS SUFFICIENT ENOUGH TO CLOTHE THE CIT WITH THE POWER TO REVISE THE ASSESSMENT ORDER AND IT WAS NOT CONSIDERED NECESSAR Y IN SUCH CIRCUMSTANCES: FOR THE CIT TO HAVE HIMSELF MADE EN QUIRIES BEFORE CANCELLING THE ASSESSMENT. IT TRANSPIRES THAT THE FACT THAT NO ENQUIRY WAS CONDUCTED BY THE AO OR EVEN THOUGH THE ENQUIRY WAS CONDUCTED, BUT, THE RELEVANT ENQUIRY WAS OMITTED TO BE CONDUCT ED, IS SUFFICIENT TO BRAND AN ASSESSMENT ORDER ERRONEOUS AND PREJUDICIAL TO THE INTERESTS OF THE REVENUE. SIMILAR VIEW HAS BEEN TAKEN BY THE HO NBLE SUPREME COURT IN THE CASE OF RAMPYARI DEVI SARAOGI VS. CIT (1968) 67 ITR 84 (SC) IN WHICH IT HAS BEEN HELD THAT AN ASSESSMENT MADE BY T HE AO IN UNDUE HASTE WITHOUT MAKING ANY ENQUIRY WOULD RENDER AN A SSESSMENT ORDER ERRONEOUS AND PREJUDICIAL TO THE INTERESTS OF THE R EVENUE. SIMILAR VIEW HAS BEEN TAKEN BY THE HONBLE APEX COURT IN SMT. TARA DEVI AGGARWAL VS. CIT (1973) 88 ITR 323 (SC). WE HAVE HELD IN AN EARLIER PARA THAT THE ASSESSMENT ORDERS UNDER CONSIDERATION WERE PASSED I N UNDUE HASTE IN ITA NO.1104/KOL/2014 (M/S SUBHALAKSHMI VANIJYA PVT. L TD.) & 18 OTHER APPEALS OF DIFFERENT ASSESSEES 99 TERMS OF LACK OF PROPER ENQUIRY, THEREBY MAKING THE M ELIGIBLE FOR REVISION BY THE CIT U/S 263 OF THE ACT. 21.F. THE HONBLE GUJARAT HIGH COURT IN ADDL. CIT VS. MUKUR CORPORATION (1978) 111 ITR 312 (GUJ) , HAS HELD THAT IT IS NOT NECESSARY THAT CIT IN HIS ORDER U/S 263 SHOULD COME TO A FIRM CONCLUSION THAT THE ORDER OF THE AO WAS ERRONEOUS IN SO FAR AS IT WAS P REJUDICIAL TO THE INTEREST OF THE REVENUE. WHERE THE AO ALLOWED DEDU CTION WITHOUT PROPERLY PROBING THE MATTER, THE HONBLE HIGH COURT HELD THAT THE INITIATION OF PROCEEDINGS U/S 263 WAS PROPER. 21.G. FROM AN OVERVIEW OF THE ABOVE DISCUSSED JU DGMENTS, IT IS CRYSTAL CLEAR THAT WHERE THE AO FAILS TO CONDUCT AN ENQUIRY OR PROPER ENQUIRY, WHICH IS CALLED FOR IN THE GIVEN CIRCUMSTANCES, THE CIT IS EMPOWERED TO SET ASIDE THE ASSESSMENT ORDER BY TREATING IT AS ER RONEOUS AND PREJUDICIAL TO THE INTERESTS OF THE REVENUE. IN SUCH CIRCUMSTA NCES, IT IS NOT FURTHER REQUIRED ON THE PART OF THE CIT TO EXPRESSLY SHOW W HERE THE ASSESSMENT ORDER WENT WRONG. THE VERY FACT THAT NO ENQUIRY WA S CONDUCTED OR NO ITA NO.1104/KOL/2014 (M/S SUBHALAKSHMI VANIJYA PVT. L TD.) & 18 OTHER APPEALS OF DIFFERENT ASSESSEES 100 PROPER ENQUIRY WAS CONDUCTED IN THE REQUIRED CIRCUM STANCES, IS SUFFICIENT IN ITSELF TO INVOKE THE PROVISIONS OF SE CTION 263. 22. WE, THEREFORE, ANSWER ALL THE FIVE ASPECTS DI SCUSSED ABOVE BY HOLDING THAT : I) THE ENQUIRY CONDUCTED BY THE AO IN SUCH CASES CANT BE CONSTRUED AS A PROPER ENQUIRY; II) CIT U/S 263 C AN SET ASIDE THE ASSESSMENT ORDER AND DIRECT THE AO TO CONDUCT A THO ROUGH ENQUIRY, NOTWITHSTANDING THE JURISDICTION OF THE AO IN MAKIN G ENQUIRIES ON THE ISSUES OR MATTERS AS HE CONSIDERS FIT IN TERMS OF S ECTION 142(1) AND 143(2) OF THE ACT, WHICH IS RELEVANT ONLY UP TO THE COMPLETION OF ASSESSMENT ; III) INADEQUATE INQUIRY CONDUCTED BY THE AO IN THE GIVEN CIRCUMSTANCES IS AS GOOD AS NO ENQUIRY AND AS SUCH THE CIT WAS EMPOWERED TO REVISE THE ASSESSMENT ORDER ; IV) THE ORDER OF THE CIT IS NOT BASED ON IRRELEVANT CONSIDERATIONS AND FURTHER IN THE PRESENT CIRCUMSTANCES, HE WAS NOT OBLIGED TO POSITIVELY IND ICATE THE DEFICIENCIES IN THE ASSESSMENT ORDER ON MERITS ON THE QUESTION O F ISSUE OF SHARE CAPITAL AT A HUGE PREMIUM ; V) THE AO IN THE GIVEN CIRCUMSTANCES CANT BE SAID TO HAVE TAKEN A POSSIBLE VIEW AS THE REVISI ON IS SOUGHT TO BE DONE ITA NO.1104/KOL/2014 (M/S SUBHALAKSHMI VANIJYA PVT. L TD.) & 18 OTHER APPEALS OF DIFFERENT ASSESSEES 101 ON THE PREMISE THAT THE AO DID NOT MAKE ENQUIRY THE REBY RENDERING THE ASSESSMENT ORDER ERRONEOUS AND PREJUDICIAL TO THE I NTEREST OF THE REVENUE ON THAT SCORE ITSELF. 23. A. HAVING DEALT WITH ALL THE FIVE MAJOR POINT S TAKEN UP BY THE LD. AR IN SUPPORT OF CONTENTION FOR SETTING ASIDE THE ORDE RS PASSED U/S 263, NOW WE TURN TO THE RESPECTIVE PRECEDENTS DIRECTLY ON TH E POINT, RELIED BY BOTH THE SIDES ON THE SUSTAINABILITY OR OTHERWISE OF ORD ER U/S 263. THE LD. AR SUBMITTED THAT THE KOLKATA BENCH OF THE TRIBUNAL IN LOTUS CAPITAL FINANCIAL SERVICES LTD. VS. ITO (ITA NO.479/KOL/201 1) HAS DECIDED SIMILAR ISSUE OF REVISION IN THE ASSESSEES FAVOR. IT WAS SUBMITTED THAT THIS TRIBUNAL ORDER HAS BEEN AFFIRMED BY THE HONBL E JURISDICTIONAL HIGH COURT VIDE ITS JUDGMENT DATED 16.7.2012, A COPY OF WHICH WAS PLACED ON RECORD. HE SUBMITTED THAT WHEN THE AO PASSED THE O RDER, THESE PRECEDENTS IN FAVOUR OF THE ASSESSEE ENABLED HIM TO FORM A VIEW THAT EXAMINATION OF SHARE CAPITAL WITH PREMIUM WAS NOT C ONTEMPLATED U/S 68 AND, HENCE, THE LD. CIT ENTERTAINING A CONTRARY VIE W COULD NOT INVOKE THE PROVISIONS OF SECTION 263. PER CONTRA, THE LD. DR ALSO RELIED ON CERTAIN ITA NO.1104/KOL/2014 (M/S SUBHALAKSHMI VANIJYA PVT. L TD.) & 18 OTHER APPEALS OF DIFFERENT ASSESSEES 102 TRIBUNAL ORDERS PASSED BY THE TRIBUNAL DIRECTLY ON THE POINT UPHOLDING REVISION. 23.B. WE HAVE HEARD BOTH THE SIDES. IT IS NO DOU BT TRUE THAT THE TRIBUNAL IN THE CASE OF LOTUS CAPITAL FINANCIAL (SUPRA) HAS SET ASIDE THE ORDER PASSED BY THE CIT IN WHICH THE LATTER REVISED THE ASSESSMENT ORDER, INTER ALIA , ON THE GROUND OF IMPROPER EXAMINATION BY THE AO O F CERTAIN SHARES ISSUED BY THE ASSESSEE COMPANY AT PREMIUM. WHEN WE GO TO THE JUDGMENT RENDERED BY THE HONBLE CALCUTTA HIGH COUR T IN THE CASE OF LOTUS CAPITAL, IT IS MANIFESTED THAT THE SUBSTANTIA L QUESTION OF LAW WAS NOT FOUND TO ARISING FROM THE TRIBUNAL ORDER AS THE SAME WAS BASED ON THE FACTS RECORDED BY THE TRIBUNAL. THE HONBLE HI GH COURT REFUSED TO INTERFERE WITH THE FACTUAL FINDINGS RECORDED BY THE TRIBUNAL, BEING THE FINAL FACT FINDING AUTHORITY. NOT ADMITTING THE QU ESTION AS A SUBSTANTIAL QUESTION OF LAW ARISING FROM THE TRIBUNAL ORDER, CA NNOT BE EQUATED WITH THE APPROVING THE VIEW TAKEN BY THE TRIBUNAL. SINC E THE HONBLE HIGH COURT REFUSED TO RE-APPRECIATE THE FACTS AS RECORD ED BY THE TRIBUNAL AND, THEREAFTER, DID NOT ADMIT THE QUESTION OF LAW PROPO SED BY THE REVENUE, ITA NO.1104/KOL/2014 (M/S SUBHALAKSHMI VANIJYA PVT. L TD.) & 18 OTHER APPEALS OF DIFFERENT ASSESSEES 103 THE ONLY CONCLUSION WHICH CAN BE DRAWN IS THAT AT B EST, THERE IS NO DECISION OF THE HONBLE HIGH COURT ON VARIOUS LEGAL ASPECTS OF THE MATTER AS HAVE BEEN DISCUSSED ABOVE. AU CONTRAIRE , WE FIND THAT IDENTICAL ISSUE CAME UP FOR CONSIDERATION BEFORE TH E KOLKATA BENCH OF THE TRIBUNAL IN FIVE CASES. IN ALL SUCH CASES, THE FACTS WERE MUTATIS MUTANDIS SIMILAR INASMUCH AS THESE COMPANIES BEFORE THE TRIB UNAL HAD ISSUED SHARES AT HUGE PREMIUM AND THE AO HAD ACCEP TED THE GENUINENESS OF THE TRANSACTIONS IN PROCEEDINGS U/S 147. IN ALL SUCH CASES, THE CIT INVOKED HIS POWER U/S 263 THEREBY R ESTORING THE MATTER TO THE AO FOR A PROPER EXAMINATION AND THE TRIBUNAL HA S UPHELD THE ACTION OF THE CIT BY DISMISSING THE APPEALS FILED BY THE A SSESSEES. DETAILED ORDERS HAVE BEEN PASSED BY THE KOLKATA BENCH IN THE CASE OF M/S BISAKHA SALES PVT. LTD. VS. CIT (ITA NO.1493/K/2013 , DATED10.9.2014), BRINDAVAN COMMODITIES PVT. LTD. VS . CIT (ITA NO. 1607/KOL/2013, DT. 24.10.2014), RIDHI SIDHI VINC OM (P) LTD. VS. CIT (ITA NO.1410/K/2013, DATED 10.10.2014), STAR GRIHA PVT. LTD. VS. CIT (ITA NO.1244/K/2013, DATED 14.8.2014) AND BEE TEE C REDIT MARKETING ITA NO.1104/KOL/2014 (M/S SUBHALAKSHMI VANIJYA PVT. L TD.) & 18 OTHER APPEALS OF DIFFERENT ASSESSEES 104 PVT. LTD. VS. CIT (ITA NO.1598/K/2013, ORDER DATED 14.8.2014). IN ALL THE ABOVE FIVE CASES, THE TRIBUNAL HAS UPHELD THE O RDERS PASSED BY THE CIT U/S 263, DISMISSING THE APPEALS OF THE ASSESSE S. IT IS FURTHER RELEVANT TO NOTE THAT THE ORDER IN THE CASE OF BISAKHA SALES (SUPRA) HAS BEEN PASSED BY THE TRIBUNAL AFTER DULY CONSIDERING THE E ARLIER ORDER FAVOURABLE TO THE ASSESSEE IN LOTUS CAPITAL (SUPRA). ON FURTHE R ANALYSIS, WE FIND THAT THE FACT OF SUCH DUMMY COMPANIES FLOATED ON A LARGE SCALE INVOLVING SIMILAR MODUS OPERANDI, WAS NOT THERE BEFORE THE TRIBUNAL IN THE CASE OF LOTUS (SUPRA), WHICH ORDER WAS PASSED IN 2011. THIS CASE WAS DECIDED IN ISOLATION WITHOUT THE OVERALL BACKGROUND OF A WEB O F SEVERAL HUNDRED COMPANIES FLOATED ON THE SAME PATTERN WITH ULTERIOR MOTIVE. AS AGAINST THAT, MOST OF THE ABOVE ORDERS PASSED BY THE TRIBUN AL AGAINST THE ASSESSEE HAVE BEEN PASSED IN 2014 AFTER CONSIDERING THE FACT UAL MATRIX IN A GREAT DETAIL. CONSIDERING THE TOTALITY OF THE FACTS AND C IRCUMSTANCES IN THE INSTANT CASE, WE ARE MORE INCLINED TO FOLLOW THE LA TTER CONSIDERED VIEW TAKEN BY THE KOLKATA BENCH OF THE TRIBUNAL AGAINST THE ASSESSEE IN FIVE ORDERS. APART FROM THAT, THE RECENT JUDGMENT OF TH E HONBLE ITA NO.1104/KOL/2014 (M/S SUBHALAKSHMI VANIJYA PVT. L TD.) & 18 OTHER APPEALS OF DIFFERENT ASSESSEES 105 JURISDICTIONAL HIGH COURT IN MAITHAN INTERNATIONAL (SUPRA) HAS CLEARLY APPROVED THE STANDPOINT OF THE REVENUE IN UPHOLDING THE ORDER PASSED U/S 263 WHERE THE AO CONDUCTED INADEQUATE ENQUIRY W HICH HAS BEEN EQUATED WITH NO ENQUIRY IN THE GIVEN CIRCUMSTANCES. THE RATIO OF THIS JUDGMENT APPLIES WITH FULL FORCE TO THE FACTS UNDER CONSIDERATION. RESPECTFULLY FOLLOWING THE RATIO DECIDENDI OF THE JUDGMENT OF THE HONBLE HIGH COURT IN THE CASED OF MAITHAN INTERNATIONAL (SUPRA) AND THE AFOREQUOTED FIVE TRIBUNAL ORDERS AGAINST THE AS SESSEE, WE ARE OF THE CONSIDERED OPINION THAT THE LD. CIT WAS JUSTIFIED I N REVISING THE ASSESSMENT ORDER AND REMITTING THE MATTER TO THE FI LE OF AO FOR CONDUCTING PROPER ENQUIRY IN THE LIGHT OF THE DIREC TIONS GIVEN BY HIM. 24. WE, THEREFORE, SUM UP OUR CONCLUSION THAT THE LD. CIT WAS JUSTIFIED IN SETTING ASIDE ALL THE ASSESSMENT ORDERS IN QUEST ION, ON MERITS. 25. WE HAVE NOTICED ABOVE THAT APART FROM MERITS OF THE CASES, SOME OF THE LD. ARS HAVE TAKEN UP AND ARGUED OTHER LEGAL GR OUNDS CHALLENGING THE JURISDICTION, LIMITATION, NON-SERVICE OR IMPROP ER SERVICE OF NOTICE U/S 263 ETC., WHICH WE WILL TAKE UP CONSIDERATION HEREI NAFTER. ITA NO.1104/KOL/2014 (M/S SUBHALAKSHMI VANIJYA PVT. L TD.) & 18 OTHER APPEALS OF DIFFERENT ASSESSEES 106 C. ISSUE OF NON-SERVICE OF SHOW CAUSE NOTICE U/S. 2 63 : 26.A. IN THE CASE OF REWARD TIE-UP PRIVATE LIMITE D, THE ASSESSEE HAS ALSO CHALLENGED THE ORDER U/S. 263 OF THE ACT AS VO ID IN LAW FOR NON- SERVICE OF SHOW CAUSE NOTICE BEFORE PASSING OF THE IMPUGNED ORDER. THE LEARNED AR BROUGHT TO OUR NOTICE PARA 5 OF THE ORDE R U/S. 263 OF THE ACT, WHEREIN THE LD. CIT HAS RECORDED THE FACT THAT NOTI CES U/S. 263 OF THE ACT WERE ISSUED TO THE ASSESSEE ON 4.3.2013 AND 6.3.201 3 BUT WERE NOT SERVED SINCE NO SUCH COMPANY EXISTED AT THE GIVEN A DDRESS AND HENCE WAS DULY SERVED BY AFFIXTURE AT THE LAST KNOWN ADDR ESS OF THE ASSESSEE ON 12.3.2013. THE LD. CIT HAS ALSO RECORDED THE FACT THAT NONE APPEARED ON BEHALF OF THE ASSESSEE NOR ANY REPLY RECEIVED ON TH E DATE OF HEARING ON 18.3.2013. THE ORDER U/S.263 OF THE ACT, WAS THERE FORE, AS AN EX-PARTE ORDER. 26.B. THE LEARNED AR CONTENDED THAT AS PER THE PR OVISIONS OF SEC. 282(1)(B) OF THE ACT READ WITH ORDER V RULE 17 OF C ODE OF CIVIL PROCEDURE, 1908 (CPC), AFFIXTURE AS A MODE OF SERVI CE OF NOTICE CAN BE RESORTED TO ONLY WHERE THE PERSON ON WHOM NOTICE IS SOUGHT TO BE SERVED ITA NO.1104/KOL/2014 (M/S SUBHALAKSHMI VANIJYA PVT. L TD.) & 18 OTHER APPEALS OF DIFFERENT ASSESSEES 107 OR HIS AGENT REFUSES TO SIGN ACKNOWLEDGEMENT OR WHE RE THE SERVING OFFICER, AFTER USING ALL DUE AND REASONABLE DILIGEN CE, CANNOT FIND THE DEFENDANT (I.E., THE ASSESSEE ON WHOM NOTICE IS SOU GHT TO BE SERVED). THE LEARNED AR THEREAFTER BROUGHT TO OUR NOTICE THA T THE ORDER U/S. 263 OF THE ACT AS WELL AS THE CONSEQUENTIAL ORDER DATED 18 .3.2014 PASSED BY THE AO WERE DULY SERVED ON THE ASSESSEE AT THE ADDRESS AS FOUND IN THE RECORDS OF THE REVENUE. AS PER HIS VERSION, THE AS SESSEE WAS AVAILABLE AT ALL POINTS OF TIME AT THE ADDRESS AS FOUND IN THE R ECORDS OF THE INCOME-TAX DEPARTMENT. THE SERVICE OF SHOW CAUSE NOTICE U/S. 263 OF THE ACT BY AFFIXTURE WAS THEREFORE CLAIMED TO BE NOT IN ACCORD ANCE WITH THE REQUIREMENTS OF ORDER V RULE 17 CPC AS IT WAS NOT T RUE THAT SERVICE OF NOTICE IN THE USUAL MANNER COULD NOT HAVE BEEN EFFE CTED EVEN AFTER DUE AND REASONABLE DILIGENCE AS THE ASSESSEE COULD NOT BE FOUND. 26.C. FOR THE PROPOSITION THAT BEFORE PASSING AN ORDER U/S.263 OF THE ACT THE ASSESSEE MUST BE GIVEN A REASONABLE OPPORTUNITY OF BEING HEARD BY ISSUE AND SERVICE OF A SHOW CAUSE NOTICE, THE LEARN ED COUNSEL FOR THE ASSESSEE RELIED ON CERTAIN DECISIONS INCLUDING SMT. KIRON DEVI SINGHEE ITA NO.1104/KOL/2014 (M/S SUBHALAKSHMI VANIJYA PVT. L TD.) & 18 OTHER APPEALS OF DIFFERENT ASSESSEES 108 VS. CIT & ORS. 58 ITR 0419 (CAL) AND CIT VS. RAMENDRA NATH GHOSH 82 ITR 0888 (SC). IN SUPPORT OF THE PROPOSITION THAT IF A NOTICE U/ S.263 OF THE ACT IS NOT PROPERLY SERVED, THE ORDER PASSED U/S. 263 OF THE ACT IS LIABLE TO BE HELD AS INVALID AND VOID, THE LEARNED COUNSEL FOR THE ASSESSEE RELIED ON CERTAIN DECISIONS INCLUDING TIN BOX CO. VS. CIT 249 ITR 0216 (SC) . CERTAIN OTHER DECISIONS ON THE IMPORTANCE OF OPPO RTUNITY OF BEING HEARD BEFORE PASSING ORDERS HAVING CIVIL CONSEQUENC ES BY STATUTORY AND OTHER AUTHORITIES, WERE ALSO BROUGHT TO OUR NOTICE . 26.D. PER CONTRA, THE LEARNED DR PLACED RELIANCE ON THE ORDER OF THE CIT ON THIS ISSUE AND HIGHLIGHTED THE FACT THAT TWO NOTICES WERE SENT TO THE ASSESSEE AT THE KNOWN ADDRESS BUT COULD NOT BE SERVED AND ONLY THEREAFTER SERVICE BY AFFIXTURE WAS RESORTED TO. O UR ATTENTION WAS ALSO DRAWN TOWARDS THE CONDUCT OF THE ASSESSEE IN AS MUC H AS IN THE ASSESSMENT PROCEEDINGS AFTER THE ORDER U/S. 263 OF THE ACT, HE DID NOT PARTICIPATE IN THE PROCEEDINGS RESULTING IN AN ORDE R U/S. 144 OF THE ACT. THE ASSESSEE HOWEVER RECEIVED THE ORDER OF ASSESSME NT AT THE KNOWN ADDRESS. ACCORDING TO HIM THE NON-SERVICE OF NOTIC E U/S. 263 OF THE ACT ITA NO.1104/KOL/2014 (M/S SUBHALAKSHMI VANIJYA PVT. L TD.) & 18 OTHER APPEALS OF DIFFERENT ASSESSEES 109 AT THE KNOWN ADDRESS IS ALSO PART OF THE DESIGN OF THE ASSESSEE WHEREBY IT WAS TRYING TO AVOID THE PROCESS OF SCRUTINY OF THE RECEIPT OF SHARE CAPITAL DURING THE PREVIOUS YEAR. IN THIS REGARD HE POINTE D OUT THAT THE REASSESSMENT PROCEEDINGS WERE INITIATED ONLY AT THE INSTANCE OF THE ASSESSEE BY HIS FILING LETTER BEFORE THE AO FOR ISS UE OF INTIMATION U/S.143(1). THEREAFTER, THE ASSESSMENT WAS REOPENE D AND THE ASSESSEE PROMPTLY PARTICIPATED IN SUCH PROCEEDINGS. WHEN TH E ASSESSMENT COMPLETED U/S. 147 OF THE ACT WAS SOUGHT TO BE REVI SED IN PROCEEDINGS U/S. 263 OF THE ACT, IT EVADED THE SERVICE OF NOTIC E. THE ASSESSEE HOWEVER PROMPTLY FILED APPEAL AGAINST THE ORDER U/S . 263 OF THE ACT, GIVING THE VERY SAME ADDRESS AT WHICH NOTICES WERE RETURNED AND HENCE COULD NOT BE SERVED BY THE REVENUE. IN THE GROUNDS OF APPEAL, THE ASSESSEE REMAINS SILENT AS TO ITS CORRECT ADDRESS F OR SERVICE. IT HAS NOT BEEN STATED BY THE ASSESSEE THAT IT WAS NOT CARRYIN G ON BUSINESS AT THE ADDRESS AT WHICH SERVICE OF NOTICE WAS EFFECTED BY AFFIXTURE. THE LEARNED DR POINTED OUT THAT IN SEVERAL SUCH CASES IT HAD CO ME TO LIGHT THAT SHELL COMPANIES HAD BEEN FORMED FOR CONVERTING UNACCOUNTE D MONEY INTO ITA NO.1104/KOL/2014 (M/S SUBHALAKSHMI VANIJYA PVT. L TD.) & 18 OTHER APPEALS OF DIFFERENT ASSESSEES 110 ACCOUNTED MONEY AND THE ASSESSEE BEING A PART OF SU CH GAME PLAN, WAS TRYING TO PLAYING HIDE AND SEEK WITH THE REVENUE AC CORDING TO ITS SUITABILITY. HE ARGUED THAT THE SEQUENCE OF EVENTS AND THE WHOLE DESIGN ADOPTED BY THE ASSESSEE SHOULD NOT BE LOST SIGHT OF WHILE EXAMINING THE CLAIM OF THE ASSESSEE REGARDING IMPROPER SERVICE OF NOTICE U/S.263 OF THE ACT. IN THE ASSESSMENT PROCEEDINGS AFTER THE ORDER OF CIT U/S. 263 ALSO, THE ASSESSEE DID NOT PARTICIPATE IN THE PROCEEDINGS . ACCORDING TO HIM THE CIRCUMSTANCES OF THE CASE CLEARLY SHOWED THAT THE M OTIVE OF THE ASSESSEE WAS TO EVADE SERVICE OF NOTICE AND THEREFORE SERVIC E BY AFFIXTURE WAS THE ONLY PROPER MODE OF SERVICE IN THE FACTS AND CIRCUM STANCES OF THE PRESENT CASE. 26.E. IN THE CASE OF M/S. TULSI TRADECOM PVT. L TD., THERE IS SIMILAR CHALLENGE TO THE SERVICE OF NOTICE U/S. 263 OF THE ACT. THE CIRCUMSTANCES UNDER WHICH ORDER U/S. 263 OF THE ACT WAS PASSED BY THE CIT ARE IDENTICAL TO THE CASE OF REWARD TIE-UP PVT. LTD. (S UPRA), WHICH WE HAVE SET OUT IN THE EARLIER PARAGRAPHS. THERE ARE SOME D ISTINGUISHING FEATURES IN THIS APPEAL, IN SO FAR AS SERVICE OF NOTICE U/S. 263 OF THE ACT IS ITA NO.1104/KOL/2014 (M/S SUBHALAKSHMI VANIJYA PVT. L TD.) & 18 OTHER APPEALS OF DIFFERENT ASSESSEES 111 CONCERNED. SHRI N.K. PODDAR, THE LEARNED AR POINTE D OUT THAT SHOW- CAUSE NOTICE WAS NOT EVEN SERVED BY AFFIXTURE IN TH IS CASE. HE DREW OUR ATTENTION TO A LIST OF DATES AND EVENTS FILED IN TH IS CASE. HE DREW OUR ATTENTION TO THE ORDER DATED 30.3.2013 PASSED U/S 2 63 OF THE ACT IN WHICH THE CIT HAS CLEARLY OBSERVED THAT A SHOW CAUSE NOTI CE WAS SENT BY POST FOR COMPLIANCE ON 22.3.2013 AND THE SAME WAS RETURN ED BY THE POSTAL AUTHORITIES ON 25.3.2013. HE BROUGHT TO OUR NOTICE THAT AS EARLY AS 31.5.2012, THE REGISTERED OFFICE OF THE ASSESSEE WA S SHIFTED FROM 2, RAJA WOODMUNT STREET, KOLKATA-1 TO THE ADDRESS SHOWN IN THE ORDER U/S 263 OF THE ACT, NAMELY, B-222, 2ND FLOOR, OKHLA INDUSTR IAL AREA, PHASE-I, NEW DELHI 20. OUR ATTENTION WAS ALSO DRAWN TO TH E FACT THAT THE CHANGE OF REGISTERED OFFICE FROM WEST BENGAL TO NEW DELHI WAS DULY INTIMATED TO THE DEPARTMENT AND APPROVED BY THE COM PANY LAW BOARD. THE AO WHILE COMPLETING THE PROCEEDINGS U/S 147 REA D WITH SECTION 143(3) OF THE ACT WAS INFORMED BY A LETTER FILED IN THE COURSE OF ASSESSMENT PROCEEDINGS INTIMATING THE CHANGE OF ADD RESS ACCOMPANIED BY THE ORDER OF CLB AND THE REQUISITE FORMS FILED B Y THE ASSESSEE WITH ITA NO.1104/KOL/2014 (M/S SUBHALAKSHMI VANIJYA PVT. L TD.) & 18 OTHER APPEALS OF DIFFERENT ASSESSEES 112 THE REGISTRAR OF COMPANIES. THESE DOCUMENTS ARE PL ACED AT PAGE NOS. 33-36 OF THE ASSESSEES PAPER BOOK. ACCORDING TO T HE LEARNED AR, THE SHOW CAUSE NOTICE IN THESE CIRCUMSTANCES OUGHT TO H AVE BEEN SENT AT THE NEW ADDRESS. HE POINTED OUT THAT THE CIT ISSUED SH OW-CAUSE NOTICE DATED 18.3.2013 AND THE SAME WAS ADDRESSED AT THE O LD ADDRESS IN KOLKATA. SINCE THE ORDER U/S 263 OF THE ACT CONTAI NED THE DELHI ADDRESS OF THE ASSESSEE, THE SAME WAS RECEIVED BY THE ASSES SEE AND, THEREAFTER, THE ASSESSEE OBTAINED COPY OF THE SHOW-CAUSE NOTICE DATED 18.3.2013 WHICH IS PLACED AT PAGE 11 AND 12 OF THE ASSESSEES PAPER BOOK FROM THE OFFICE OF THE CIT. ACCORDING TO HIM, MERE RETURN O F THE POSTAL COVER UNSERVED CANNOT BE TREATED AS VALID SERVICE. IT WA S SUBMITTED BY HIM THAT THE CIT DID NOT MAKE EVEN AN ATTEMPT TO EFFECT THE SERVICE BY AFFIXTURE. OUR ATTENTION WAS DRAWN TO THE DECISION OF THE HONBLE BOMBAY HIGH COURT IN THE CASE OF BALAJI MARBLES VS. UNION OF INDIA (2015) 58 TAXMANN.COM 155 (BOM) , WHEREIN THE HONBLE BOMBAY HIGH COURT HAS EXPRESSED A VIEW THAT WHEN THE ASSESSEE H AS INFORMED HIS CHANGED ADDRESS TO THE DEPARTMENT, SERVICE OF NOTIC E HAS TO BE EFFECTED AT ITA NO.1104/KOL/2014 (M/S SUBHALAKSHMI VANIJYA PVT. L TD.) & 18 OTHER APPEALS OF DIFFERENT ASSESSEES 113 THE CHANGED ADDRESS. IT IS ONLY WHEN SERVICE OF NO TICE AT THE CHANGED ADDRESS BECOMES IMPOSSIBLE THAT NOTICE CAN BE SERVE D IN A DIFFERENT MANNER. OUR ATTENTION WAS ALSO DRAWN TO THE DECISI ON OF THE HONBLE DELHI HIGH COURT IN THE CASE OF CIT VS. ESHAN HOLDINGS (P) LTD. (2012) 25 TAXMANN.COM 99 (DEL) , WHEREIN THE HONBLE DELHI HIGH COURT HELD THAT SERVICE OF NOTICE ISSUED U/S 148 AT THE OLD AD DRESS OF THE ASSESSEE, THOUGH RETURN OF INCOME FILED BEFORE ISSUE OF SUCH NOTICE SHOWED THE NEW ADDRESS, WAS NOT A VALID SERVICE. 26.F. THE FACTS OF RAMSHILA ENTERPRISES PVT. LTD. IN WHICH THIS ISSUE IS CHALLENGED ARE ALMOST SIMILAR TO THOSE OF REWARD TI E-UP PVT. LTD. HERE ALSO, THE LD. AR CLAIMED THAT THE NOTICE WAS SENT A T EARLIER ADDRESS, WHEREAS THE NEW ADDRESS WAS ALREADY AVAILABLE ON TH E RECORD OF THE DEPARTMENT AND THE CHANGE WAS DULY ACKNOWLEDGED BY THE DEPARTMENT. THE LD. AR SUBMITTED THAT REPORT OF THE IT INSPECTO R WHO EFFECTED SERVICE BY AFFIXTURE ALSO INDICATED THE AFFIXTURE A T THE OLD ADDRESS. IT WAS POINTED OUT THAT BEFORE EFFECTING SERVICE OF NOTICE BY AFFIXTURE, THE IT INSPECTOR WAS OBLIGED UNDER LAW TO EXERCISE DUE DIL IGENCE TO FIND OUT IF ITA NO.1104/KOL/2014 (M/S SUBHALAKSHMI VANIJYA PVT. L TD.) & 18 OTHER APPEALS OF DIFFERENT ASSESSEES 114 NOTICE COULD BE PERSONALLY SERVED ON THE ASSESSEE. HE POINTED OUT THAT WHEN THE INSPECTOR GOES TO A WRONG ADDRESS FOR SERV ICE OF NOTICE, THERE IS COMPLETE ABSENCE OF DUE DILIGENCE ON THE PART OF TH E INSPECTOR. FOR THE PROPOSITION THAT SERVICE BY AFFIXTURE WAS NOT VALID AS THE SAME WAS NOT IN CONFORMITY WITH THE PROVISIONS OF ORDER-V, RULE 17 OF THE CPC. IN SUPPORT OF THIS PROPOSITION, HE RELIED ON CERTAIN D ECISIONS INCLUDING ITO VS. ASHOK GLASS WORKS, 125 ITR 491 . 26.G. THE LD. DR POINTED OUT THAT RAMSHILA ENTERP RISES PVT. LTD., HAS BEEN FREQUENTLY SHIFTING ITS OFFICE TO DIFFERENT PL ACES FROM TIME TO TIME. IN THE LETTER ADDRESSED TO THE AO RECEIVED BY THE A O ON 6.4.2010, THE ASSESSEES ADDRESS WAS SHOWN AS 14, PRINCE STREET, 3RD FLOOR, KOLKATA 72. NOTICE U/S 148 OF THE ACT WAS SERVED AT THIS A DDRESS ON THE ASSESSEE IN CONNECTION WITH THE RE-ASSESSMENT PROCEEDINGS FO R THE AY 2008-09. HE POINTED OUT THAT THIS NOTICE WAS RECEIVED BY THE ASSESSEE AT 4, CLIVE ROAD, 4TH FLOOR, ROOM NO.405, KOLKATA. THE ASSESSE E PARTICIPATED IN THE RE-ASSESSMENT PROCEEDINGS. THEREAFTER, THE ASS ESSEE INTIMATED THE AO AND THE CIT BY LETTERS RECEIVED BY THE AO/CIT ON 7.5.2010 AND ITA NO.1104/KOL/2014 (M/S SUBHALAKSHMI VANIJYA PVT. L TD.) & 18 OTHER APPEALS OF DIFFERENT ASSESSEES 115 21.5.2010 RESPECTIVELY, TO THE EFFECT THAT IT WAS W ITHDRAWING THE MIGRATION OF PAN AND, THEREFORE, THE ASSESSEE HAD N OT SHIFTED TO A NEW ADDRESS. IN THE LIGHT OF THE ABOVE FACTS, THE LD. DR SUBMITTED THAT THE SERVICE BY AFFIXTURE WAS PROPER AS THE ASSESSEE ITS ELF WANTED SERVICE OF NOTICE AT THE OLD ADDRESS FROM 21.5.2010 AND AS EAR LY AS 7.5.2010. 26.H. WITHOUT PREJUDICE TO THE ABOVE SUBMISSIONS, THE LD. DR ALSO SUBMITTED THAT NON-SERVICE OR IMPROPER SERVICE OF N OTICE U/S 263 OF THE ACT WILL NOT RENDER THE ORDER U/S 263 OF THE ACT A NULLITY. IT COULD AT BEST BE AN IRREGULARITY CAPABLE OF CURING. IN THIS REGARD, A COPY OF DECISION OF THE HONBLE CALCUTTA HIGH COURT DATED 1 0.3.2015 IN CORUS STEELS PVT. LTD. WP NO.6103 OF 2015 DATED 10.3.2015 WAS FILED BEFORE US. IN THE AFORESAID DECISION, THE HONBLE CALCUTT A HIGH COURT TOOK THE VIEW THAT NON-SERVICE OF SHOW CAUSE NOTICE WILL NOT RENDER THE ORDER U/S 263 A NULLITY. RELYING ON THE DECISION OF THE HON BLE SUPREME COURT IN THE CASE OF CIT VS. ELECTRO HOUSE 82 ITR 824(SC) , IT WAS CONTENDED THAT THE LAW DOES NOT REQUIRE NOTICE U/S 263 TO BE SERVE D AT ALL. IN CONCLUSION, IT WAS SUBMITTED BY HIM THAT WHEN THE ASSESSE HIMSE LF HAD GIVEN A ITA NO.1104/KOL/2014 (M/S SUBHALAKSHMI VANIJYA PVT. L TD.) & 18 OTHER APPEALS OF DIFFERENT ASSESSEES 116 PARTICULAR ADDRESS FOR SERVICE OF NOTICE AND WHEN T HE NOTICE WAS SERVED AT THAT ADDRESS THOUGH BY AFFIXTURE, IT COULD NOT B E SAID THAT THE ASSESSEE WAS NOT GIVEN PROPER OPPORTUNITY OF BEING HEARD. 26.I. AS REGARDS THE CASE OF TULSI TRADCOM PVT. L TD., THE LD. DR STATED THAT CHANGE OF ADDRESS WAS NOT INTIMATED IN A MANNE R KNOWN TO LAW AND THEREFORE THE NOTICE WAS SENT AT THE OLD ADDRESS. IT WAS ALSO SUBMITTED THAT IN THE LIGHT OF BACKGROUND FACTS OF THE CASE A S EXPLAINED BY THE CIT IN THE IMPUGNED ORDER U/S.263 OF THE ACT, THE CHANG E OF ADDRESS WAS ALSO PART OF THE DESIGN WHEREBY THE ASSESSEES WERE TRYIN G TO MISLEAD THE DEPARTMENT. IN THE CIRCUMSTANCES, IT WAS PRAYED TH AT THE SERVICE OF NOTICE BE HELD TO BE PROPER. 26.J. THE LEARNED AR IN HIS REJOINDER SUBMITTED T HAT OPPORTUNITY OF BEING HEARD IS ALWAYS CONTEMPLATED IN THE PROVISION S WHERE THE RESULT IS LIKELY TO AFFECT THE RIGHTS OF AN ASSESSEE. SUCH OP PORTUNITY OF HEARING MAY BE SPECIFICALLY ENSHRINED IN THE PROVISION OR I N ITS ABSENCE, IT HAS TO BE INFERRED. HE POINTED OUT THAT THE HONBLE SUPRE ME COURT IN THE CASE OF MANEKA GANDHI VS. UNION OF INDIA 1981 (1) SCC 644 ( SC) AT PAGE ITA NO.1104/KOL/2014 (M/S SUBHALAKSHMI VANIJYA PVT. L TD.) & 18 OTHER APPEALS OF DIFFERENT ASSESSEES 117 709 PARA 94, RELIED ON THE DECISION OF THE HOUSE OF LO RDS IN THE CASE OF RIDGE VS. BALDWIN AND HELD THAT EVEN WHERE OPPORTUNITY OF BEING HEARD IS NOT STATUTORILY REQUIRED TO BE GIVEN AND WHERE T HE PRINCIPLES OF NATURAL JUSTICE ARE VIOLATED, THEN THE ORDER PASSED WITHOUT AFFORDING SUCH OPPORTUNITY OF BEING HEARD IS TO BE REGARDED AS VO ID AND IT IS NOT AN IRREGULARITY WHICH CAN BE CURED BY CALLING UPON THE AUTHORITY TO AFFORD OPPORTUNITY OF BEING HEARD. 26.K. WE HAVE GIVEN A VERY CAREFUL CONSIDERATION TO THE RIVAL SUBMISSIONS IN THE LIGHT OF THE PRECEDENTS RELIED U PON. FIRSTLY WE WILL DEAL WITH THE CASE OF REWARD TIE-UP PVT. LTD. THE REQUIREMENTS OF ORDER V RULE 17 OF CPC IS THAT THE PROCESS SERVER AFTER U SING ALL DUE AND REASONABLE DILIGENCE CANNOT FIND THE DEFENDANT WHO IS ABSENT FROM HIS RESIDENCE AT THE TIME WHEN SERVICE IS SOUGHT TO BE EFFECTED ON HIM AT THE KNOWN ADDRESS AND THERE IS NO LIKELIHOOD OF HIS BEI NG FOUND AT THE RESIDENCE WITHIN A REASONABLE TIME AND THERE IS NO AGENT EMPOWERED TO ACCEPT SERVICE OF THE SUMMONS ON HIS BEHALF NOR ANY OTHER PERSON ON WHOM SERVICE CAN BE MADE. IT IS ONLY THEREAFTER TH AT THE PROCESS SERVER ITA NO.1104/KOL/2014 (M/S SUBHALAKSHMI VANIJYA PVT. L TD.) & 18 OTHER APPEALS OF DIFFERENT ASSESSEES 118 IS EMPOWERED TO EFFECT SERVICE BY AFFIXTURE. IN THE PRESENT CASE TWO NOTICES WERE SENT TO THE ASSESSEE AT THE KNOWN ADDR ESS. BOTH THE NOTICES COULD NOT BE SERVED AND WERE RETURNED UNSERVED. IT IS ONLY THEREAFTER THAT SERVICE OF NOTICE WAS EFFECTED BY AFFIXTURE. THE LEARNED COUNSEL FOR THE ASSESSEE HARPED ON THE ASPECT OF ABSENCE OF DUE AND REASONABLE DILIGENCE TO FIND THE ASSESSEE BEFORE EFFECTING SER VICE BY AFFIXTURE. THE ASSESSEE IS A COMPANY AND ITS KNOWN ADDRESS IS 113, N.S.ROAD, KOLKATTA-700 001. THE NOTICES WHEN SENT AT THIS AD DRESS WERE RETURNED TWICE AS THERE WAS NONE TO RECEIVE THE NOTICES, IT HAS TO BE REASONABLY PRESUMED THAT THE REQUIREMENTS OF ORDER V RULE 17 C PC DID EXIST TO EFFECT PROPER SERVICE OF NOTICE. A COMPANY IS AN A RTIFICIAL JURIDICAL PERSON. THEREFORE THE REQUIREMENTS OF FINDING AVAI LABILITY OF THE ASSESSEE WITHIN A REASONABLE TIME AT THE KNOWN ADDR ESS CANNOT BE STRICTLY COMPLIED WITH. THE FACT THAT THE ORDER U/S. 263 OF THE ACT WAS SERVED AT THE KNOWN ADDRESS IS ALSO NOT DENIED. THE AFFIXTUR E OF NOTICE AT THE LAST KNOWN ADDRESS IS ALSO NOT DENIED BY THE ASSESSEE. THE EMPHASIS IS ONLY ON THE ABSENCE OF DUE DILIGENCE BY THE PROCESS SERV ER TO FIND OUT THE ITA NO.1104/KOL/2014 (M/S SUBHALAKSHMI VANIJYA PVT. L TD.) & 18 OTHER APPEALS OF DIFFERENT ASSESSEES 119 WHEREABOUTS OF THE ASSESSEE. THIS IS A FACT WHICH THE ASSESSEE ALLEGES BASED ON SURMISES. IN THIS REGARD IT IS ALSO SEEN THAT THE REASSESSMENT PROCEEDINGS WERE INITIATED ONLY AT THE INSTANCE OF THE ASSESSEE BY FILING LETTER BEFORE THE AO FOR ISSUE OF INTIMATION U/S. 1 43(1) OF THE ACT. THEREAFTER, THE ASSESSMENT WAS REOPENED AND THE ASS ESSEE PROMPTLY PARTICIPATED IN SUCH PROCEEDINGS. WHEN THE ASSESSM ENT COMPLETED U/S. 147 OF THE ACT WAS SOUGHT TO BE REVISED IN PROCEEDI NGS U/S.263 OF THE ACT, THE ASSESSEE EVADED THE SERVICE OF NOTICE. TH E ASSESSEE, HOWEVER, PROMPTLY FILED APPEAL AGAINST THE ORDER U/S.263 OF THE ACT, GIVING THE VERY SAME ADDRESS AT WHICH NOTICES WERE RETURNED UN SERVED. THERE IS NO ALLEGATION THAT THE ADDRESS AT WHICH NOTICE WAS SER VED BY AFFIXTURE IS NO LONGER THE ADDRESS OF THE ASSESSEE FOR SERVICE OF N OTICE. AS RIGHTLY POINTED OUT BY THE LEARNED DR, THE SEQUENCE OF EVEN TS PREVAILING IN SUCH COMPANIES INVOLVED IN ASSISTING THE CONVERSION OF U NACCOUNTED MONEYS INTO ACCOUNTED MONIES, CANNOT BE LOST SIGHT OF. TH E CIRCUMSTANCES OF THE CASE CLEARLY SHOW THAT THE MOTIVE OF THE ASSESSEE W AS TO EVADE SERVICE OF NOTICE AND THEREFORE SERVICE BY AFFIXTURE, IN OUR CONSIDERED OPINION, ITA NO.1104/KOL/2014 (M/S SUBHALAKSHMI VANIJYA PVT. L TD.) & 18 OTHER APPEALS OF DIFFERENT ASSESSEES 120 CANNOT BE HELD AS ANYTHING OTHER THAN A PROPER SERV ICE. AS SUCH, WE ARE SATISFIED THAT THE SERVICE OF NOTICE U/S. 263 OF TH E ACT IN THE GIVEN FACTS AND CIRCUMSTANCES OF THE CASE WAS PROPER. THE SUBS EQUENT CONDUCT OF THE ASSESSEE IN NOT PARTICIPATING IN ASSESSMENT PRO CEEDINGS AFTER THE ORDER U/S. 263 OF THE ACT, CANNOT ALSO NOT BE LOST SIGHT OF. SINCE ON FACTS WE HAVE COME TO THE CONCLUSION THAT THERE HAS BEEN VALID SERVICE OF NOTICE U/S. 263 OF THE ACT, WE ARE OF THE VIEW THAT THE DECISIONS RELIED UPON BY THE LEARNED AR DO NOT REQUIRE CONSIDERATION . THE OBJECTION BY THE ASSESSEE IN THIS REGARD IS HELD TO BE WITHOUT A NY BASIS. 26.L. AS FAR AS THE CASE OF TULSI TRADECOM PVT. L TD. IS CONCERNED, THE ADDRESS GIVEN IN THE RETURN OF INCOME WAS THE BASIS ON WHICH NOTICES WERE SENT AT THE KOLKATA ADDRESS. THERE IS NOTHING ON RECORD TO INDICATE THAT THE CHANGE OF ADDRESS WAS TAKEN COGNIZANCE BY THE AO. IN THE CIRCUMSTANCES NOTICES WERE SENT AT THE KOLKATA ADDR ESS. THE ASSESSEE CANNOT, THEREFORE, HAVE ANY GRIEVANCE AS WILL BE DI SCUSSED IN THE SUBSEQUENT PARAGRAPHS. ITA NO.1104/KOL/2014 (M/S SUBHALAKSHMI VANIJYA PVT. L TD.) & 18 OTHER APPEALS OF DIFFERENT ASSESSEES 121 26.M. AS FAR AS SERVICE OF NOTICE IN THE CASE OF RAMSHILA ENTERPRISES PVT. LTD. IS CONCERNED, WE FIND THAT THE ASSESSEE H AS BEEN SHIFTING ITS ADDRESS FROM TIME TO TIME, AS HAS BEEN POINTED OUT BY THE LEARNED DR. WHEN SUCH FREQUENT CHANGE IN THE ADDRESS IS SEEN IN THE BACKGROUND OF THE FACTUAL POSITION AS DISCUSSED IN THE EARLIER PA RT OF THE ORDER, WE CANNOT RESIST THE CONCLUSION THAT THE SERVICE AT TH E LAST KNOWN ADDRESS BY AFFIXTURE WAS PROPER. 26.N. APART FROM DISCUSSING THE PROPER SERVICE OF NOTICE ON MERITS OF THE ABOVE CASES, WE MAY ALSO ADD AS A LEGAL PROPOSI TION THAT THERE IS NO REQUIREMENT OF SERVICE OF NOTICE U/S. 263 OF THE AC T IN TERMS OF SECTION 282 OF THE ACT AND CPC AS HAS BEEN ARGUED BEFORE US . SUB-SECTION (1) OF SECTION 263 PROVIDES THAT : `THE COMMISSIONER MAY CALL FOR AND EXAMINE THE RECORD OF ANY PROCEEDING UNDER THIS ACT , AND IF HE CONSIDERS THAT ANY ORDER PASSED THEREIN BY THE ASSESSING OFFI CER IS ERRONEOUS IN SO FAR AS IT IS PREJUDICIAL TO THE INTERESTS OF THE RE VENUE, HE MAY, AFTER GIVING THE ASSESSEE AN OPPORTUNITY OF BEING HEARD AND AFTER MAKING OR CAUSING TO BE MADE SUCH INQUIRY AS HE DEEMS NECESSARY, PASS SUCH ORDER THEREON ITA NO.1104/KOL/2014 (M/S SUBHALAKSHMI VANIJYA PVT. L TD.) & 18 OTHER APPEALS OF DIFFERENT ASSESSEES 122 AS THE CIRCUMSTANCES OF THE CASE JUSTIFY, INCLUDING AN ORDER ENHANCING OR MODIFYING THE ASSESSMENT, OR CANCELLING THE ASSESSM ENT AND DIRECTING A FRESH ASSESSMENT. THE REQUIREMENT IN THIS PROVISIO N IS TO PASS THE ORDER ` AFTER GIVING THE ASSESSEE AN OPPORTUNITY OF BEING H EARD. IT IS UNLIKE THE LANGUAGE OF CERTAIN PROVISIONS OF THE ACT, INCLUD ING SECTION 148 WHICH EXPRESSLY CONTAIN THE REQUIREMENT OF ISSUE OF NOTIC E, AS IS EVIDENT FROM SUB-SECTION (1) OF SECTION 148 WHICH PROVIDES THAT : ` BEFORE MAKING THE ASSESSMENT, REASSESSMENT OR RECOMPUTATION UNDER SEC TION 147, THE ASSESSING OFFICER SHALL SERVE ON THE ASSESSEE A NOTICE REQUIRING HIM TO FURNISH WITHIN SUCH PERIOD, AS MAY BE SPECIFIED IN THE NOTICE, A RETURN OF HIS INCOME ....... THUS IT IS EVIDENT THAT WHEREAS SECTION 148 SPECIFICALLY REQUIRES SERVING A NOTICE ON THE ASSESSEE, SECTION 263 SIMPLY TALKS OF GIVING AN OPPORTUNITY OF BEING HEARD. SECTION 282 O F THE ACT DISCUSSES THE SERVICE OF NOTICE GENERALLY AND NOT GIVING OPPORTUNITY OF HEARING. SUCH OPPORTUNITY OF HEARING CAN BE GIVEN EITHER BY MEANS OF SERVICE OF NOTICE IN TERMS OF SECTION 282 OR OTHERWISE. CLAUSE (B) OF SUB-SECTION (1) CONTAINING THE REQUIREMENT OF SERVICE `IN SUCH MANN ER AS PROVIDED UNDER ITA NO.1104/KOL/2014 (M/S SUBHALAKSHMI VANIJYA PVT. L TD.) & 18 OTHER APPEALS OF DIFFERENT ASSESSEES 123 THE CODE OF CIVIL PROCEDURE, 1908 (5 OF 1908) FOR T HE PURPOSES OF SERVICE OF SUMMONS CAN APPLY ONLY WHEN THERE IS RE QUIREMENT OF SERVICE OF NOTICE IN THE RELEVANT PROVISION, WHICH WOULD REQUIRE COMPLIANCE IN TERMS OF SECTION 282. BUT WHERE A PAR TICULAR PROVISION DOES NOT CONTEMPLATE SERVICE OF NOTICE AND ONLY REF ERS TO GIVING OPPORTUNITY OF HEARING, THEN THE STRICT PROVISIONS OF SECTION 282 CANNOT APPLY. SO LONG AS THE ASSESSEE STANDS INFORMED OF T HE PROCEEDINGS AGAINST HIM, THERE CAN BE NO IRREGULARITY IN THIS R EGARD. THUS IT IS CLEAR THAT UNLIKE PROVISIONS OF SEC. 148 OF THE ACT, SEC. 263 OF THE ACT DOES NOT REQUIRE ANY NOTICE TO BE STRICTLY ISSUED BY THE COM MISSIONER IN CONFORMITY WITH SECTION 282 OF THE ACT. ONCE THE L AW DOES NOT SPECIFICALLY OBLIGE HIM TO GIVE NOTICE EXCEPT GIVIN G THE OPPORTUNITY OF HEARING TO THE ASSESSEE, THE STRICT CONDITIONS OF S ERVICE OF NOTICE AS MANDATED U/S 282 OF THE ACT CANNOT BE IMPORTED. ALL THAT HE IS REQUIRED TO DO IS TO GIVE THE ASSESSEE AN OPPORTUNITY OF BEI NG HEARD AND MAKE OR CAUSE TO MAKE SUCH INQUIRY AS HE DEEMS NECESSARY. THIS REQUIREMENT HAS NOTHING TO DO WITH THE JURISDICTION OF THE COMM ISSIONER. IT SIMPLY ITA NO.1104/KOL/2014 (M/S SUBHALAKSHMI VANIJYA PVT. L TD.) & 18 OTHER APPEALS OF DIFFERENT ASSESSEES 124 PERTAINS TO THE REGION OF NATURAL JUSTICE. BREACH OF THE PRINCIPLES OF NATURAL JUSTICE MAY PREJUDICE THE LEGALITY OF THE O RDER MADE BUT CANNOT AFFECT THE JURISDICTION OF THE COMMISSIONER. SO LO NG AS THE ORDER PASSED BY THE AO IS ERRONEOUS AND PREJUDICIAL TO THE INTER EST OF THE REVENUE, THE JURISDICTION VESTS WITH THE CIT TO REVISE SUCH AN O RDER, OF COURSE, SUBJECT TO THE LIMITATION ENSHRINED IN THE PROVISION. THE A BOVE IS THE VIEW OF THE HONBLE SUPREME COURT EXPRESSED IN THE CASE OF CIT VS. ELECTRO HOUSE 82 ITR 824 (SC). THE DECISIONS RELIED BY THE LEARNED ARS TAKING A CONTRARY VIEW, IN OUR CONSIDERED OPINION, HAVE TO BE READ SUBJECT TO THE DECISION OF THE HONBLE SUPREME COURT. THEREFORE, T HE STRINGENT CONDITIONS OF SERVICE OF NOTICE AS REQUIRED U/S. 14 8 OF THE ACT AND IN THE MANNER CONTEMPLATED BY SEC. 282 OF THE ACT, CANNOT BE READ INTO THE PROVISIONS OF SEC. 263 OF THE ACT. 26.O. SEC. 282(1) OF THE ACT AS IT EXISTED AFTER THE SUBSTITUTION BY THE FINANCE (NO.2) ACT, 2009 W.E.F. 1-10-2009 PROVIDES THAT THE SERVICE OF A NOTICE OR SUMMON OR REQUISITION OR ORDER OR ANY OTHER COMMUNICATION UNDER THIS ACT MAY BE MADE BY DELIVERING OR TRANSMITTING A COPY THEREOF, TO THE PERSONS THEREIN NAMED ITA NO.1104/KOL/2014 (M/S SUBHALAKSHMI VANIJYA PVT. L TD.) & 18 OTHER APPEALS OF DIFFERENT ASSESSEES 125 (A) BY POST OR BY SUCH COURIER SERVICES AS MAY BE APPRO VED BY THE BOARD; OR (B) IN SUCH MANNER AS PROVIDED UNDER THE CODE OF CIVIL PROCEDURE, 1908 (5 OF 1908) FOR THE PURPOSES OF SER VICE OF SUMMONS; OR (C) IN THE FORM OF ANY ELECTRONIC RECORD AS PROVIDED IN CHAPTER IV OF THE INFORMATION TECHNOLOGY ACT, 200 (21 OF 2000) OR (D) BY ANY OTHER MEANS OF TRANSMISSION OF DOCUMENTS AS PROVIDED BY RULES MADE BY THE BOARD IN THIS BEHALF. 26.P. PRIOR TO THE AMENDMENT, SECTION 282(1) PROV IDED AS FOLLOWS: A NOTICE OR REQUISITION UNDER THIS ACT MAY BE SERV ED ON THE PERSONS THEREIN NAMED EITHER BY POST OR AS IF IT WE RE A SUMMONS ISSUED BY A CURT UNDER THE CODE OF CIVIL PROCEDURE, 1908 (5 OF 1908). 26.Q. A READING OF THE PROVISIONS OF SEC. 282(1) PRIOR TO AND AFTER ITS AMENDMENT W.E.F. 1-10-2009 CLEARLY SHOWS THAT IT IS ONLY IN RESPECT OF A NOTICE THAT IS MANDATORILY REQUIRED TO BE SERVED UN DER THE ACT THAT THE REQUIREMENT OF SERVING IT STRICTLY IN THE MANNER RE QUIRED BY THE AFORESAID PROVISIONS IS CONTEMPLATED. THE EXPRESSION OR ANY OTHER COMMUNICATION UNDER THIS ACT AS APPEARING IN SEC. 282(1) OF THE ACT AFTER THE AMENDMENT W.E.F. 1-10-2009 WOULD COVER ON LY CASES MENTIONED IN CLAUSE (C) AND (D) OF THE AMENDED PROVISIONS OF SEC. 282(1) OF THE ACT. ITA NO.1104/KOL/2014 (M/S SUBHALAKSHMI VANIJYA PVT. L TD.) & 18 OTHER APPEALS OF DIFFERENT ASSESSEES 126 IN OTHER WORDS THE REQUIREMENTS OF SERVICE AS REQUI RED UNDER THE CODE OF CIVIL PROCEDURE, 1908 IS NOT STRICTLY APPLICABLE TO A NOTICE U/S. 263 OF THE ACT, THOUGH OF COURSE, THE ASSESSEE MUST BE PUT TO NOTICE IN A REASONABLE MANNER ABOUT THE PROCEEDINGS AGAINST HIM. 26.R. IN THE LIGHT OF THE ABOVE DISCUSSION, THE C ONCLUSION WHICH NECESSARILY FOLLOWS IS THAT THE REQUIREMENT OF SERV ICE OF NOTICE U/S. 263 OF THE ACT STANDS ON A DIFFERENT FOOTING AND CANNOT BE COMPARED TO CASES WHERE NOTICE IS REQUIRED BY LAW TO BE MANDATORILY S ERVED ON ASSESSEE IN TERMS OF SECTION 282 OF THE ACT. ACCORDINGLY, THE CASES CITED BY THE LEARNED AR PERTAINING TO SERVICE OF NOTICE IN DIFFE RENT CONTEXTS, WHERE THE ACT MANDATES SERVICE OF NOTICE IN ACCORDANCE WI TH SECTION 282, LOSE THEIR SIGNIFICANCE. 26.S. COMING BACK TO THE LANGUAGE OF SECTION 263( 1) REQUIRING THE PASSING OF ORDER ` AFTER GIVING THE ASSESSEE AN OPPORTUNITY OF BEING HEARD, IT TRANSPIRES THAT IT REFERS TO GIVING OPPORTUNITY OF HEARING. IF DESPITE GENUINELY GIVING OPPORTUNITY OF HEARING BY THE CIT, THE ASSESSEE TRIES TO HOODWINK BY EVADING THE SERVICE OF NOTICE AS HAS BEEN DONE IN ITA NO.1104/KOL/2014 (M/S SUBHALAKSHMI VANIJYA PVT. L TD.) & 18 OTHER APPEALS OF DIFFERENT ASSESSEES 127 THE CASES BEFORE US, THEN THE REQUIREMENT OF GIVING `OPPORTUNITY OF HEARING GETS FULLY SATISFIED WITH. AS SUCH, WE DO NOT FIND ANY LACK OF OPPORTUNITY OF HEARING BY THE LD. CIT IN ALL SUCH C ASES. THIS ARGUMENT FAILS. D. WHETHER ORDER U/S 263 IS BARRED BY LIMITATION? 27.A. THE LEARNED AR OF LINSEY VINIMAY PVT. LTD. SUBMITTED THAT THE ASSESSEE FILED ITS RETURN OF INCOME FOR THE AY 200 8-09 ON 21.12.2008 AND AN INTIMATION U/S.143(1) OF THE ACT WAS ISSUED ON 3.8.2009. HE THEN BROUGHT OUR NOTICE THE FACT THAT IN THE REASONS REC ORDED FOR INITIATING PROCEEDINGS U/S. 147 OF THE ACT, A COPY OF WHICH IS PLACED AT PAGE 14 OF THE ASSESSEES PAPER BOOK, THE ISSUE OF EXAMINATIO N OF SHARE CAPITAL WAS NOT THERE, WHICH IN HIS OPINION WAS RESTRICTED ONLY TO SHARE ISSUE EXPENSES BEING CAPITAL OR REVENUE. IT WAS, THEREFO RE, PLEADED THAT THE PERIOD OF LIMITATION SHOULD BE RECKONED FROM THE DA TE OF INTIMATION U/S. 143(1) OF THE ACT VIZ., 3.8.2009, IN WHICH CASE THE LIMITATION FOR PASSING ORDER U/S. 263 OF THE ACT GOT EXPIRED ON 31.3.2012. SINCE THE ORDER WAS PASSED BY THE LD. CIT ON 30.3.2013, THE LD. AR EXPL AINED THAT SUCH ORDER ITA NO.1104/KOL/2014 (M/S SUBHALAKSHMI VANIJYA PVT. L TD.) & 18 OTHER APPEALS OF DIFFERENT ASSESSEES 128 WAS BARRED BY LIMITATION. TO BUTTRESS THIS CONTENTI ON, THE LEARNED AR DREW OUR ATTENTION TO THE DECISION OF THE HONBLE S UPREME COURT IN THE CASE OF CIT VS. ALAGENDRA FINANCE LTD. 293 ITR 1 (SC). HE ALSO RELIED ON THE DECISION OF THE HONBLE BOMBAY HIGH COURT IN THE CASE OF LARK CHEMICALS 368 ITR 655 (BOM) WHEREIN SIMILAR VIEW HAS BEEN TAKEN. 27.B. THE LEARNED DR ON THE OTHER HAND POINTED OU T THAT THE ORDER SOUGHT TO BE REVISED U/S. 263 OF THE ACT WAS THE OR DER DATED 6.4.2010 PASSED U/S. 147 R.W.S. 143(3) OF THE ACT AND IN THE SAID ORDER THE ISSUE OF RECEIPT OF SHARE CAPITAL BY THE ASSESSEE WAS INVEST IGATED BY THE AO, EVEN THOUGH THE ASSESSMENT WAS NOT REOPENED FOR THAT PUR POSE. HE POINTED OUT THE RELEVANT PROVISIONS OF EXPLANATION 3 TO SE C.147 OF THE ACT WHICH PROVIDES THAT ONCE AN ASSESSMENT IS VALIDLY REOPENE D, THE AO IS FREE TO GO INTO ANY OTHER ISSUES RELATING TO INCOME ESCAPIN G ASSESSMENT OR UNDERASSESSMENT AND HIS JURISDICTION IS NOT RESTRIC TED TO ONLY SUCH ISSUES ON WHICH REASSESSMENT PROCEEDINGS WERE INITIATED. HE POINTED OUT THAT IN THE REASSESSMENT PROCEEDINGS, THE AO DID GO INTO THE QUESTION OF RECEIPT OF SHARE CAPITAL AT PREMIUM AND THEREFORE, THE SAID ISSUE WAS ITA NO.1104/KOL/2014 (M/S SUBHALAKSHMI VANIJYA PVT. L TD.) & 18 OTHER APPEALS OF DIFFERENT ASSESSEES 129 CLEARLY PART OF THE REASSESSMENT PROCEEDINGS. IT W AS FURTHER SUBMITTED THAT WHILE ISSUING INTIMATION U/S. 143(1) OF THE AC T, THE AO COULD NOT HAVE GONE INTO THE EXAMINATION OF ISSUE OF SHARE CA PITAL AT PREMIUM. HE ARGUED THAT THAT INTIMATION U/S. 143(1) OF THE ACT IS NOT AN ASSESSMENT ORDER AND HENCE IT CANNOT BE SAID THAT THE ISSUE OF RECEIPT OF SHARE CAPITAL BY THE ASSESSEE WAS SUBJECT MATTER OF ANY PROCEEDI NGS U/S 143(1). 27.C. HE ALSO POINTED OUT THAT WHEN CHALLENGING T HE ORDER U/S. 263 OF THE ACT ON MERITS, ALL THE ASSESSEES HAVE TAKEN A CONSISTENT STAND THAT THE ISSUE WITH REGARD TO RECEIPT OF SHARE CAPITAL BY TH E ASSESSEE WAS THOROUGHLY EXAMINED BY THE AO IN THE REASSESSMENT P ROCEEDINGS U/S. 147 OF THE ACT AND, THEREFORE, IT WAS AT BEST A CAS E OF INADEQUATE ENQUIRY FOR WHICH JURISDICTION U/S. 263 OF THE ACT CANNOT B E INVOKED. BUT, WHEN IT COMES TO THE ISSUE OF LIMITATION, THE ASSESSEE T AKES A STAND THAT THE ISSUE WITH REGARD TO RECEIPT OF SHARE CAPITAL WAS N EVER THE SUBJECT MATTER OF REASSESSMENT PROCEEDINGS U/S. 147 OF THE ACT. I T WAS ALSO BROUGHT TO OUR NOTICE THAT SIMILAR ARGUMENT RAISED BY THE ASSE SSEE WAS CONSIDERED AND REJECTED BY THE KOLKATA BENCH OF THE TRIBUNAL I N IDENTICAL FACTS AND ITA NO.1104/KOL/2014 (M/S SUBHALAKSHMI VANIJYA PVT. L TD.) & 18 OTHER APPEALS OF DIFFERENT ASSESSEES 130 CIRCUMSTANCES IN RIDDHI SIDDHI VINCOM (P) (SUPRA) V IDE PARA 11 OF ITS ORDER. 27.D. THE LD. AR, REPRESENTING TULSI TRADECOM PV T. LTD., ALSO CLAIMED THAT THE ORDER U/S 263 OF THE ACT WAS BARRED BY LIM ITATION IN THE SAME CIRCUMSTANCES AS DISCUSSED ABOVE. IN SUPPORT OF THE CONTENTION THAT SCRUTINY OF SHARE CAPITAL WAS NEVER THE SUBJECT MAT TER OF RE-ASSESSMENT PROCEEDINGS, THE LD. AR BROUGHT TO OUR NOTICE THE D ECISION OF THE HONBLE PUNJAB & HARYANA HIGH COURT IN THE CASE OF VIPAN KHANNA VS. CIT, 255 ITR 220 (P&H). IN THE AFORESAID CASE, THE ASSESSEE HAD FILED A RETURN OF INCOME AND THE INTIMATION U/S 143(1)(A) O F THE ACT WAS ISSUED BY THE AO. NO NOTICE U/S 143(2) WAS ISSUED TO FRAM E AN ASSESSMENT WITHIN THE TIME REQUIRED FOR FRAMING AN ASSESSMENT U/S 143(3) OF THE ACT. THEREAFTER, PROCEEDINGS U/S 147 OF THE ACT WERE INI TIATED ON THE GROUND THAT THE ASSESSEE CLAIMED DEPRECIATION AT A HIGHER RATE. THE QUESTION BEFORE THE HONBLE COURT IN THE PROCEEDINGS U/S 147 OF THE ACT WAS WHETHER THE AO CAN GO INTO ISSUES OTHER THAN CLAIM OF DEPRECIATION AT A HIGHER RATE. THE HONBLE PUNJAB &HARYANA HIGH COUR T HELD THAT THE ITA NO.1104/KOL/2014 (M/S SUBHALAKSHMI VANIJYA PVT. L TD.) & 18 OTHER APPEALS OF DIFFERENT ASSESSEES 131 ISSUES OTHER THAN CLAIMING HIGHER DEPRECIATION BECA ME FINAL BECAUSE THE AO DID NOT ISSUE A NOTICE U/S 143(2) OF THE ACT FOR FRAMING ASSESSMENT U/S 143(3) OF THE ACT. THE HONBLE HIGH COURT HELD THAT JURISDICTION U/S 147 OF THE ACT IS CONFINED ONLY TO SUCH INCOME WHIC H HAS ESCAPED TAX OR HAS BEEN UNDER-ASSESSED AND DOES NOT EXTEND TO REVI SING, REOPENING OR RE-CONSIDERING THE WHOLE ASSESSMENT. THE DECISION I N THE CASE OF SUN ENGINEERING WORKS PVT. LTD., 198 ITR 297 (SC) WAS REFERRED TO BY THE HONBLE P&H HIGH COURT. ACCORDING TO THE LD. AR, T HE ISSUE OF EXAMINATION OF SHARE CAPITAL COULD NOT BE SAID TO B E THE SUBJECT MATTER OF RE-ASSESSMENT PROCEEDINGS AND, THEREFORE, IT COULD NOT BE CLAIMED THAT THE SAID ISSUE WAS THE SUBJECT MATTER OF PROCEEDING S U/S 147 OF THE ACT. HE ALSO SUBMITTED THAT PERIOD OF LIMITATION NEEDS T O BE RECKONED FROM THE DATE OF INTIMATION U/S 143(1) OF THE ACT. SIMI LAR ARGUMENTS WERE PUT FOR IN THE CASE OF RAMSHILA ENTERPRISES PVT. LTD. O N A SPECIFIC QUERY FROM THE BENCH, IT WAS ADMITTED BY ALL THE LD. ARS THAT IF THE PERIOD OF LIMITATION IS COUNTED FROM THE DATE OF PASSING OF O RDER U/S 147, THEN THE ORDERS U/S 263 FALL WITHIN THE LIMITATION PERIOD OF TWO YEARS. ITA NO.1104/KOL/2014 (M/S SUBHALAKSHMI VANIJYA PVT. L TD.) & 18 OTHER APPEALS OF DIFFERENT ASSESSEES 132 27.E. RESPONDING TO THE THIS, THE LD. DR POINTED OUT THAT THE LAW HAS SINCE BEEN AMENDED AND EXPLANATION 3 TO SECTION 147 HAS BEEN INSERTED BY THE FINANCE ACT OF 2009 WITH RETROSPECTIVE EFFEC T FROM 1.4.1989, AS PER WHICH THE AO HAS JURISDICTION NOT ONLY TO ASSES SEE OR RE-ASSESS INCOME IN RESPECT OF ANY ISSUE WHICH HAS ESCAPED AS SESSMENT, BUT, ALSO SUCH OTHER ISSUES THAT COME TO HIS NOTICE SUBSEQUEN TLY IN THE COURSE OF THE PROCEEDINGS U/S 147 NOTWITHSTANDING THAT THE RE ASONS FOR SUCH ISSUE HAVE NOT BEEN INCLUDED IN THE REASONS RECORDED U/S 148(2). ACCORDING TO THE LD. DR, THE DECISION RELIED UPON BY THE LD. AR WOULD NOT BE OF ANY USE IN THE LIGHT OF THIS AMENDMENT. 27.F. WE HAVE GIVEN A VERY CAREFUL CONSIDERATION TO THE RIVAL SUBMISSIONS. THE PERIOD OF LIMITATION FOR PASSING AN ORDER U/S.263 OF THE ACT IN TERMS OF SEC. 263(2) OF THE ACT IS : `TWO Y EARS FROM THE END OF THE FINANCIAL YEAR IN WHICH THE ORDER SOUGHT TO BE REVI SED WAS PASSED. THE ORDERS SOUGHT TO BE REVISED BY THE LD. CIT IN THE P RESENT SET OF CASES ARE THE ORDERS U/S 147. NOW, IF WE GO BY THE DATES OF INTIMATIONS, THEN THE ORDERS U/S 263 ARE BARRED BY LIMITATION, BUT IF WE GO BY THE DATES OF THE ITA NO.1104/KOL/2014 (M/S SUBHALAKSHMI VANIJYA PVT. L TD.) & 18 OTHER APPEALS OF DIFFERENT ASSESSEES 133 ORDERS U/S 147, THEN ALL THE ORDERS PASSED U/S. 263 OF THE ACT ARE ADMITTEDLY WITHIN THE LIMITATION PERIOD. 27.G. THE LARGER QUESTION, THUS, IS WHETHER THE I SSUE OF SHARE CAPITAL BY THE ASSESSEE DURING THE PREVIOUS YEAR WAS SUBJECT M ATTER OF REASSESSMENT PROCEEDINGS? IT IS NO DOUBT TRUE THAT IN THE REASO NS RECORDED FOR INITIATING PROCEEDINGS U/S.147 OF THE ACT, THE ISSU E OF EXAMINATION OF SHARE CAPITAL RAISED BY THE ASSESSEE DURING THE PRE VIOUS YEAR WAS NOT THE REASON FOR RE-OPENING OF THE ASSESSMENT. IT WAS RE STRICTED ONLY TO SHARE ISSUE EXPENSES WHETHER CAPITAL OR REVENUE EXPENDITU RE OR SOME OTHER MINOR DISALLOWANCES IN OTHER CASES. NEVERTHELESS IN THE REASSESSMENT PROCEEDINGS IN ALL THE CASES, THE AOS VENTURED TO I SSUE NOTICES U/S. 133(6) OF THE ACT TO SOME OF THE SHAREHOLDERS FOR E XAMINING AS TO WHETHER THE INGREDIENTS OF SEC. 68 WERE SATISFIED. AS TO WHETHER SUCH ENQUIRY WAS ADEQUATE OR NOT, IS A DIFFERENT ISSUE. THE FACT REMAINS THAT BY ISSUING NOTICES U/S. 133(6) OF THE ACT, THE AOS TRIED TO EXAMINE THE QUESTION OF GENUINENESS OF SHARE CAPITAL IN PROCEED INGS U/S 147. IT THUS FOLLOWS THAT BY HOLDING THAT THE ISSUE OF SHARE CAP ITAL AT PREMIUM WAS ITA NO.1104/KOL/2014 (M/S SUBHALAKSHMI VANIJYA PVT. L TD.) & 18 OTHER APPEALS OF DIFFERENT ASSESSEES 134 NOT PROPERLY EXAMINED BY THE AOS, THE LD. CIT REVIS ED THE ORDERS U/S 147 AND NOT THE INTIMATION U/S 143(1) OF THE ACT. 27.H. WE ALSO FIND MERIT IN THE ARGUMENT OF THE L EARNED DR THAT WITH THE INTRODUCTION OF EXPLANATION 3 TO SECTION 147 WI TH RETROSPECTIVE EFFECT FROM 1.4.1989, THE AO ACQUIRES JURISDICTION NOT ONL Y TO ASSESS OR RE- ASSESS INCOME IN RESPECT OF WHICH HE ISSUED NOTICE U/S 148, BUT ALSO SUCH OTHER ISSUES THAT COME TO HIS NOTICE SUBSEQUENTLY I N THE COURSE OF THE PROCEEDINGS U/S 147, NOTWITHSTANDING THAT THE REASO NS FOR SUCH ISSUE HAVE NOT BEEN INCLUDED IN THE REASONS RECORDED U/S 148(2). CLAUSE 57 OF THE FINANCE (NO. 2) BILL, 2009 INSERTING EXPLANATIO N 3 IN SECTION 147 WITH RETROSPECTIVE EFFECT FROM 1ST APRIL, 1989 PROV IDES AS UNDER : - 'FOR THE PURPOSE OF ASSESSMENT OR REASSESSMENT UNDE R THIS SECTION, THE ASSESSING OFFICER MAY ASSESS OR REASSESS THE IN COME IN RESPECT OF ANY ISSUE WHICH HAS ESCAPED ASSESSMENT AND SUCH ISSUE COMES TO HIS NOTICE SUBSEQUENTLY IN THE COURSE OF THE PRO CEEDINGS UNDER THE SECTION, NOTWITHSTANDING THAT THE REASONS FOR S UCH ISSUE HAVE NOT BEEN INCLUDED IN THE REASONS RECORDED UNDER SUB -SECTION 2 OF SECTION 148'. ITA NO.1104/KOL/2014 (M/S SUBHALAKSHMI VANIJYA PVT. L TD.) & 18 OTHER APPEALS OF DIFFERENT ASSESSEES 135 27.I. NOTES ON CLAUSES APPENDED TO THE FINANCE (NO . 2) BILL ALSO STATE THAT CLAUSE 57 OF THE BILL SEEKS TO AMEND SECTION 1 47 RELATING TO INCOME ESCAPING ASSESSMENT. IT IS PROPOSED TO INSERT EXPLA NATION 3 TO THE SAID SECTION SO AS TO PROVIDE THAT FOR THE PURPOSE OF AS SESSMENT OR REASSESSMENT UNDER THIS SECTION, THE ASSESSING OFFI CER MAY ASSESS OR REASSESS INCOME IN RESPECT OF ANY ISSUE WHICH HAS E SCAPED ASSESSMENT AND SUCH ISSUE COMES TO HIS NOTICE SUBSEQUENTLY IN THE COURSE OF PROCEEDING UNDER THIS SECTION, NOTWITHSTANDING THAT THE REASONS FOR SUCH ISSUE HAVE NOT BEEN INCLUDED IN THE REASONS RECORDE D UNDER SUB-SECTION (2) OF SECTION 148. THIS AMENDMENT HAS BEEN MADE EF FECTIVE RETROSPECTIVELY FROM 1ST APRIL, 1989. FURTHER, THE MEMORANDUM EXPLAINING THE PROVISIONS OF THE FINANCE BILL MENTI ONS THAT IT IS A CLARIFICATORY AMENDMENT, AS UNDER : - 'THE EXISTING PROVISIONS OF SECTION 147 PROVIDES, INTER ALIA , THAT IF THE ASSESSING OFFICER HAS REASON TO BELIEVE THAT AN Y INCOME CHARGEABLE TO TAX HAS ESCAPED ASSESSMENT FOR ANY AS SESSMENT YEAR, HE MAY ASSESS OR REASSESS SUCH INCOME AFTER RECORDI NG REASONS FOR REOPENING THE ASSESSMENT. FURTHER, HE MAY ALSO ASSE SS OR REASSESS SUCH OTHER INCOME WHICH HAS ESCAPED ASSESSMENT AND WHICH COMES TO HIS NOTICE SUBSEQUENTLY IN THE COURSE OF PROCEED INGS UNDER THIS SECTION. SOME COURTS HAVE HELD THAT THE ASSESSING O FFICER HAS TO ITA NO.1104/KOL/2014 (M/S SUBHALAKSHMI VANIJYA PVT. L TD.) & 18 OTHER APPEALS OF DIFFERENT ASSESSEES 136 RESTRICT THE REASSESSMENT PROCEEDINGS ONLY TO ISSUE S IN RESPECT OF WHICH THE REASONS HAVE BEEN RECORDED FOR REOPENING THE ASSESSMENT. HE IS NOT EMPOWERED TO TOUCH UPON ANY O THER ISSUES FOR WHICH NO REASONS HAVE BEEN RECORDED. THE ABOVE INTERPRETATION IS CONTRARY TO THE LEGISLATIVE INTENT. WITH A VIEW TO FURTHER CLARIFYING THE LEGISLATIVE INTENT, IT IS PROPOSED T O INSERT AN EXPLANATION IN SECTION 147 TO PROVIDE THAT THE ASSE SSING OFFICER MAY ASSESS OR REASSESS INCOME IN RESPECT OF ANY ISS UE WHICH COMES TO HIS NOTICE SUBSEQUENTLY IN THE COURSE OF PROCEED INGS UNDER THIS SECTION, NOTWITHSTANDING THAT THE REASON FOR SUCH I SSUE HAS NOT BEEN INCLUDED IN THE REASONS RECORDED UNDER SUB-SECTION (2) OF SECTION 148.' 27.J. IN VIEW OF THE AFORESAID STATUTORY AMENDMEN T, IT IS CLEAR THAT THE SCOPE OF REASSESSMENT IS NO MORE CONFINED TO THE IS SUES REFERRED TO IN NOTICE U/S 148, BUT ALSO EXTENDS TO OTHER ISSUES WH ICH COME TO THE NOTICE OF THE AO DURING THE COURSE OF REASSESSMENT PROCEED INGS INDICATING THE ESCAPEMENT OF INCOME. NO DOUBT THE ISSUE OF SHARE C APITAL AT PREMIUM WAS NOT SUBJECT MATTER OF NOTICE U/S 148, NEVERTHEL ESS THE AO PROCEEDED TO EXAMINE THIS ASPECT, THEREBY BRINGING IT WITHIN THE AMBIT OF THE ORDER U/S 147. 27.K. NOW WE TAKE UP THE NEXT ASPECT OF THIS ISSU E, AS TO WHETHER INTIMATION U/S 143(1) CAN AT ALL THE CHARACTERIZED AS `ORDER ELIGIBLE FOR REVISION U/S 263. IN THIS REGARD, WE FIND THAT THE HONBLE KERALA HIGH ITA NO.1104/KOL/2014 (M/S SUBHALAKSHMI VANIJYA PVT. L TD.) & 18 OTHER APPEALS OF DIFFERENT ASSESSEES 137 COURT IN CIT VS. K.V. MANKARAM & CO. (2000) 245 ITR 353 (KER ) HAS HELD THAT INTIMATION U/S 143(1) IS AN ORDER ONLY FO R SECTIONS 154, 246 AND 264 AND FOR ALL OTHER PURPOSES IS ONLY NOTICE OF DE MAND. SIMILARL VIEW HAS BEEN TAKEN BY THE HONBLE DELHI HIGH COURT IN MTNL VS. CBDT (2000) 246 ITR 173 (DEL) HOLDING THAT INTIMATION U/S 143(1) IS NOT AN ASSESSMENT ORDER. SINCE THE SUBJECT OF REVISION U/S 263 CAN ONLY BE AN `ORDER PASSED.. BY THE ASSESSING OFFICER, WE FAIL TO SEE AS TO HOW `INTIMATION ISSUED U/S 143(1) IN ALL SUCH CASES, W HICH CAN BY NO STRETCH OF IMAGINATION BE TREATED AS AN `ORDER FOR THE PUR POSES OF SECTION 263, CAN BE CONSIDERED FOR THE PURPOSES OF LIMITATION. 27.L. VIEWED FROM ANY ANGLE, IT IS CLEAR THAT THE SUBJECT MATTER OF REVISION IN ALL THE CASES UNDER CONSIDERATION WERE THE ORDERS PASSED U/S 147 OF THE ACT. GOING BY THE ADMISSION OF THE LD. A RS, IF LIMITATION IS COUNTED FROM THE DATE OF ORDERS U/S 147, THEN THE O RDERS U/S 263 ARE WITHIN THE LIMITATION PERIOD. THIS CONTENTION OF TH E LD. ARS, THEREFORE, FAILS. E. TERRITORIAL JURISDICTION OF THE CIT ITA NO.1104/KOL/2014 (M/S SUBHALAKSHMI VANIJYA PVT. L TD.) & 18 OTHER APPEALS OF DIFFERENT ASSESSEES 138 28.A. THIS ISSUE ARISES IN THE CASE OF RAMSHILA ENTERPRISES PVT. LTD. THE LD. AR SUBMITTED THAT THE LD. CIT, KOLKATA-II, KOLKATA, WHO PASSED THE IMPUGNED ORDER HAD NO TERRITORIAL JURISDICTION TO DO SO. HE FIRSTLY DREW OUR ATTENTION TO THE ORDER U/S.263 AND SUBMITT ED THAT THE SAME WAS PASSED ON 26.3.2013 BY THE CIT, KOLKATA-II, KOLKATA . IT WAS ALSO SHOWN THAT THE SHOW-CAUSE NOTICE DATED 18.3.2013 U/S. 263 OF THE ACT, WHICH WAS ALSO ISSUED BY THE CIT, KOLKATA-II, KOLKATA. H E ALSO INVITED OUR ATTENTION TOWARDS AN ORDER DATED 3.9.2012 PASSED U/ S. 127(2)(A) OF THE ACT WHEREBY THE JURISDICTION OVER THE ASSESSEE WAS TRANSFERRED FROM ITO, WARD-4(1), KOLKATA TO ACIT/DCIT, CENTRAL CIRCLE XIX , KOLKATA WITH IMMEDIATE EFFECT. IT WAS, THEREFORE, URGED THAT TH E CIT, KOLKATA-II, KOLKATA, WHO PASSED THE IMPUGNED ORDER ON 26.3.2013 HAD NO JURISDICTION WHATSOEVER ON THE DATE OF PASSING THE ORDER AND THEREFORE THE PROCEEDINGS U/S.263 OF THE ACT DESERVED TO BE QUASH ED ON THIS SHORT GROUND. 28.B. IT IS NOT IN DISPUTE THAT THE CIT, KOLKATA- II, KOLKATTA HAD JURISDICTION OVER CASES WITH ITO, WARD 4(2), KOLKAT A AND CIT, CENTRAL ITA NO.1104/KOL/2014 (M/S SUBHALAKSHMI VANIJYA PVT. L TD.) & 18 OTHER APPEALS OF DIFFERENT ASSESSEES 139 CIRCLE, KOLKATA HAD JURISDICTION OVER CASES WITH AC IT/DCIT, CENTRAL CIRCLE-XIX, KOLKATA. THE ARGUMENT OF THE LEARNED A R WAS THAT ONLY THE CIT, CENTRAL CIRCLE, KOLKATA COULD HAVE EXERCISED P OWERS OF REVISION U/S. 263 OF THE ACT ON AND FROM 3.9.2012. IT IS RE LEVANT TO MENTION IN THIS REGARD THAT THE TRANSFER OF JURISDICTION OF TH E ASSESSEE FROM ITO, WARD-4(1), KOLKATA TO ACIT/DCIT, CENTRAL CIRCLE XIX , KOLKATA, HAPPENED OWING TO A SEARCH U/S. 132 OF THE INCOME T AX ACT, 1961 (ACT) IN ATHA MINES GROUP OF CASES ON 17.11.2011. THE ORDER OF ASSESSMENT WHICH WAS REVISED BY THE CIT U/S. 263 OF THE ACT, W HICH IS IMPUGNED IN THIS APPEAL, IS AN ORDER U/S. 147 R.W.S. 143(3) OF THE ACT DATED 21.5.2010 IN RELATION TO THE AY 2008-09. IT IS ALSO RELEVANT TO MENTION THAT THE TRANSFER OF JURISDICTION AS PER THE ORDER DATED 3.9 .2012 IS RELATING TO ASSESSMENT OF INCOME ARISING OUT OF SEIZED MATERIAL IN THE SEARCH AND INASMUCH AS REQUEST FOR TRANSFER OF JURISDICTION WA S MADE BY THE COMPETENT AUTHORITY FOR FACILITATING THE CO-ORDINAT ED INVESTIGATION OF SEARCH CASES. THE ORDER SPECIFICALLY MENTIONS THAT JURISDICTION IS BEING ITA NO.1104/KOL/2014 (M/S SUBHALAKSHMI VANIJYA PVT. L TD.) & 18 OTHER APPEALS OF DIFFERENT ASSESSEES 140 TRANSFERRED IN THE INTEREST OF REVENUE FOR BETTER C O-ORDINATION, EFFECTIVE INVESTIGATION AND MEANINGFUL ASSESSMENT. 28.C. THE LEARNED DR SUBMITTED THAT CIT, CENTRAL, KOLKATA, CONSEQUENT TO THE SEARCH HAD ADDRESSED A LETTER DATED 24.12.20 12 TO THE CIT, KOLKATA-II, KOLKATA, REQUESTING FOR TRANSFER OF JUR ISDICTION FROM ITO, WARD 4(1), KOLKATA TO ACIT, CENTRAL CIRCLE-19, KOLK ATA. THE LD. DR FILED BEFORE US COPY OF THE REQUEST OF CIT, CENTRA L CIRCLE, KOLKATA TO CIT, KOLKATA-II, KOLKATA DATED 24.12.2012. THIS LE TTER MENTIONS ABOUT THE SEARCH IN THE CASE OF ATHA MINES GROUP AND, F URTHER, MAKES A REFERENCE TO THE INTERESTS OF THE REVENUE, ADMINIST RATIVE CONVENIENCE AND COORDINATED INVESTIGATION, AND, ON THAT GROUND, REQ UEST WAS MADE TO PASS NECESSARY ORDER U/S 127 TRANSFERRING THE JURISDICTI ON IN THE CASE TO DCIT, CENTRAL CIRCLE-19, KOLKATA. THE LD. DR BROUGHT TO OUR NOTICE A LETTER DATED 11.7.2013 WHICH IS PLACED AT PAGE 4 OF THE RE VENUES PAPER BOOK, IN WHICH THE ASSESSEE WROTE TO THE ITO, WARD 4(1), KOLKATA, THE FACT THAT THE JURISDICTION HAD NOT BEEN CHANGED DESPITE THE O RDER DATED 3.9.2012. THE LD. DR ALSO POINTED OUT THAT IT IS ONLY ON 29.7 .2013 THAT THE ITO, ITA NO.1104/KOL/2014 (M/S SUBHALAKSHMI VANIJYA PVT. L TD.) & 18 OTHER APPEALS OF DIFFERENT ASSESSEES 141 WARD 4(1), KOLKATA PHYSICALLY TRANSFERRED ALL THE F ILES TO THE DCIT, CENTRAL CIRCLE 19, KOLKATA. COPY OF THE FORWARDING LETTER OF ITO, WARD 4(1), KOLKATA DATED 29.7.2013 WHICH WAS RECEIVED BY THE DCIT, CENTRAL CIRCLE-19 ON 5.8.2013 WAS FILED BEFORE US. THE LD. DR FURTHER SUBMITTED THAT EVEN IN THE WORST SCENARIO, THE PROC EEDINGS CANNOT BE HELD TO BE NULL AND VOID AND IT IS AT BEST AN IRREG ULARITY WHICH CAN BE CURED. 28.D. WE HAVE CONSIDERED THE RIVAL SUBMISSIONS I N THE LIGHT OF MATERIAL PLACED BEFORE US AND PRECEDENTS RELIED UPON. THE QU ESTION IS AS TO WHETHER THE JURISDICTION IN RESPECT OF THE ORDER OF ASSESSMENT PASSED U/S. 147 R.W.S. 143(3) OF THE ACT ON 21.5.2010 IN RELATI ON TO AY 2008-09, MUCH PRIOR TO EVEN THE MAKING OF REQUEST BY THE COM PETENT AUTHORITY FOR TRANSFER OF CASES FOR CO-ORDINATED INVESTIGATION AN D THAT TOO, FOR SEARCH MATTERS, COULD ALSO BE SAID TO HAVE BEEN TRANSFERRE D TO ACIT/DCIT, CENTRAL CIRCLE-XIX, KOLKATA? BEFORE ANSWERING THIS QUESTION, WE CONSIDER IT EXPEDIENT TO TAKE NOTE OF THE CONTENTIO N OF THE LD. AR ABOUT EXPLANATION BELOW SEC.127, WHICH READS AS UNDER : ITA NO.1104/KOL/2014 (M/S SUBHALAKSHMI VANIJYA PVT. L TD.) & 18 OTHER APPEALS OF DIFFERENT ASSESSEES 142 EXPLANATION - IN SECTION 120 AND THIS SECTION, THE WORD CASE , IN RELATION TO ANY PERSON WHOSE NAME IS SPECIFIED IN A NY ORDER OR DIRECTION ISSUED THEREUNDER, MEANS ALL PROCEEDINGS UNDER THIS ACT IN RESPECT OF ANY YEAR WHICH MAY BE PENDING ON THE DATE OF SUCH ORDER OR DIRECTION OR WHICH MAY HAVE BEEN COMPLETED ON OR BEFORE SUCH DATE, AND INCLUDES ALSO ALL PROCEEDINGS UNDER THIS ACT WHICH MAY BE COMMENCED AFTER THE DATE OF SUCH ORDER OR DI RECTION IN RESPECT OF ANY YEAR. 28.E. AS PER THE LD. AR, THE PROVISIONS OF SEC.12 7 OF THE ACT REFER TO ONLY TRANSFER ANY CASE. THE EXPRESSION CASE HA S BEEN DEFINED TO MEAN ALL PROCEEDINGS UNDER THIS ACT IN RESPECT OF ANY YEAR WHICH MAY BE PENDING ON THE DATE OF SUCH ORDER OR DIRECTION O R WHICH MAY HAVE BEEN COMPLETED ON OR BEFORE SUCH DATE, AND INCLUDES ALSO ALL PROCEEDINGS UNDER THIS ACT WHICH MAY BE COMMENCED AFTER THE DAT E OF SUCH ORDER OR DIRECTION IN RESPECT OF ANY YEAR. ACCORDING TO HI M, THE ASSESSMENT PROCEEDINGS COMPLETED U/S. 147 R.W.S. 143(3) OF THE ACT BY ORDER DATED 21.5.2010 WHICH WAS SOUGHT TO BE REVISED IN PROCEED INGS U/S. 263 OF THE ACT WOULD FALL WITHIN THE CATEGORY OF ALL PROCEE DINGS IN THIS ACT IN RESPECT OF ANY YEAR WHICH MAY HAVE BEEN COMPLETED B EFORE THE DATE OF ORDER U/S.127(2)(A) OF THE ACT. HE ALSO PLACED RE LIANCE ON THE DECISION ITA NO.1104/KOL/2014 (M/S SUBHALAKSHMI VANIJYA PVT. L TD.) & 18 OTHER APPEALS OF DIFFERENT ASSESSEES 143 OF THE JURISDICTIONAL HIGH COURT RENDERED IN THE CA SE OF ITO VS. ASHOKA GLASS WORKS REPORTED IN 125 ITR 491 (CAL) TO SUPPORT HIS CONTENTIONS IN THIS REGARD. IN THE AFORESAID CASE THE ASSESSEE WA S ASSESSED FOR THE AY 1962-63 BY THE ITO A WARD, DISTRICT HOWRAH. HE I NITIATED PENALTY PROCEEDINGS AND REFERRED THE PENALTY PROCEEDINGS TO IAC, RANGE XX, UNDER SEC. 274(2) OF THE ACT. PENDING THESE PROCEE DINGS, THE CIT PASSED AN ORDER U/S. 123(1) TRANSFERRING THE JURISDICTION TO THE IAC, RANGE XXII, WHO WAS GIVEN EXCLUSIVE JURISDICTION. THEREAFTER, THE IAC, RANGE XXII, CALLED UPON THE RESPONDENT TO APPEAR BEFORE HIM TO SHOW CAUSE WHY PENALTY SHOULD NOT BE IMPOSED ON HIM U/S.271(1) ( C ) OF THE ACT. THE QUESTION BEFORE THE COURT WAS AS TO WHETHER IAC, RA NGE XXII HAD VALID JURISDICTION OVER THE CASE. THE HONBLE CALCUTTA H IGH COURT HELD THAT CONSEQUENT TO THE ORDER U/S. 127(1) OF THE ACT TRAN SFERRING JURISDICTION, THE IAC, RANGE-XX WAS COMPLETELY DIVESTED OF JURISD ICTION AND IT WAS ONLY THE IAC, RANGE XXII WHO WOULD HAVE JURISDICTIO N IN THE CASE. TAKING SUPPORT FROM THIS JUDGMENT, IT WAS CLAIMED B Y THE LD. AR THAT THE ENTIRE JURISDICTION OF THE ASSESSEE GOT VESTED ONLY WITH CIT CENTRAL ITA NO.1104/KOL/2014 (M/S SUBHALAKSHMI VANIJYA PVT. L TD.) & 18 OTHER APPEALS OF DIFFERENT ASSESSEES 144 CIRCLE AND CIT KOLKATA II, KOLKATA WAS PRACTICALL Y DIVESTED OF HIS JURISDICTION OVER THE CASE OF THE APPELLANT PURSUAN T TO TRANSFER OF JURISDICTION ORDER PASSED BY HIM ON 3.9.2012 U/S 12 7(2)(A) OF THE ACT. 28.F. IN OUR CONSIDERED OPINION, THE ORDER DATED 3.9.2012 U/S. 127(2)(A) OF THE ACT ONLY TRANSFERRED JURISDICTION WITH REFER ENCE TO ASSESSMENT OF INCOME IN THE HANDS OF THE ASSESSEE CONSEQUENT TO S EIZED MATERIAL IN THE COURSE OF SEARCH ON ATHNA MINES GROUP OF CASES. THIS IS CLEAR FROM THE ORDER WHICH SPECIFICALLY REFERS TO THE TRANSFER KEEPING IN MIND INTEREST OF REVENUE FOR BETTER CO-ORDINATION, EFFE CTIVE INVESTIGATION AND MEANINGFUL ASSESSMENT. THAT DOES NOT MEAN THAT TH E JURISDICTION OF ITO, WARD-4(1) KOLKATA AND THAT OF CIT, KOLKATA-II, KOLKATA, WAS COMPLETELY TRANSFERRED EVEN IN RESPECT OF OTHER MAT TERS, MORE SPECIFICALLY THE ORDERS WHICH ALREADY STOOD PASSED BY HIM ON SUCH DATE. THE FACTS OF THE CASE DECIDED BY THE HONBLE CALCUT TA HIGH COURT IN THE CASE OF ASHOKA GLASS WORKS (SUPRA) ARE CLEARLY DISTINGUISHABLE IN AS MUCH AS THAT CASE RELATED TO TRANSFER OF JURISDICTI ON IN A SPECIFIC CASE AND SUCH TRANSFER DID NOT ARISE CONSEQUENT TO A SEARCH IN ANY GROUP CASE AS IN ITA NO.1104/KOL/2014 (M/S SUBHALAKSHMI VANIJYA PVT. L TD.) & 18 OTHER APPEALS OF DIFFERENT ASSESSEES 145 THE PRESENT CASE. THERE WAS, THEREFORE, NO NECESSIT Y FOR BETTER CO- ORDINATION, EFFECTIVE INVESTIGATION AND MEANINGFUL ASSESSMENT. THE DEFINITION OF `CASE FOR THE PURPOSE OF SEC.127 OF THE ACT AS GIVEN IN THE EXPLANATION BELOW SEC. 127 DOES NOT DEBAR THE COMMI SSIONER FROM TRANSFERRING ONLY A PARTICULAR CASE, MORE SO WHEN THE REQUEST FOR TRANSFER WAS MADE IN SPECIFIC CIRCUMSTANCES, SUCH AS PROPER CO-ORDINATION OF SEARCH CASES. THE COMMISSIONER TRANSFERRING JURISDI CTION HAS POWER TO TRANSFER ALL PROCEEDINGS UNDER THE ACT, WHICH ARE P ENDING, COMPLETED OR WHICH MAY BE COMMENCED AFTER THE DATE OF TRANSFER, BUT THAT DOES NOT MEAN THAT HE DOES NOT HAVE POWERS TO RESTRICT HIS O RDER OF TRANSFER ONLY TO A PARTICULAR CASE FOR WHICH REQUEST WAS MADE, TH EREBY, LEAVING THE JURISDICTION IN RESPECT OF OTHER CASES PERTAINING T O AN ASSESSEE TO BE EXERCISED BY THE AO/CIT WHO ALREADY HAD IT. THE POW ER TO DO A PARTICULAR ACT ALSO INCLUDES A POWER TO RESTRICT TH E EXERCISE OF POWER PARTLY. IT CANNOT BE SAID THAT THE POWER SHOULD BE EXERCISED EITHER AS A WHOLE OR NOT AT ALL. SUCH AN ARGUMENT IS FALLACIOU S AND DEFEATS THE VERY PURPOSE OF CONFERRING A LARGER POWER. AS THE ACTUA L TRANSFER OF THE FILES ITA NO.1104/KOL/2014 (M/S SUBHALAKSHMI VANIJYA PVT. L TD.) & 18 OTHER APPEALS OF DIFFERENT ASSESSEES 146 FROM THE INCUMBENT AO TO THE NEW AO HAD TAKEN PLACE ONLY ON 29.7.2013 AND FURTHER THE ORDER SOUGHT TO BE REVISE D BY THE LD. CIT U/S 263 WAS PASSED MUCH PRIOR TO THE EVEN MAKING OF REQ UEST FOR TRANSFER OF JURISDICTION IN RESPECT OF SEARCH MATTERS, WE HAVE ABSOLUTELY NO DOUBT IN OUR MIND THAT ONLY THE CIT KOLKATA II, KOLKATA HAD THE JURISDICTION TO REVISE THE ASSESSMENT ORDER PASSED U/S 147 AS HAS B EEN DONE IN THIS CASE. THE CONTENTION OF THE LEARNED AR IN THIS REGARD IS HELD TO BE WITHOUT SUBSTANCE AND NOT UNACCEPTABLE. 28.G. THE ISSUE OF TERRITORIAL JURISDICTION HAS A LSO BEEN RAISED BY THE ASSESSEE IN SATABDI VINCOME PVT. LTD. IN THIS CASE THERE IS NO DISPUTE THAT THE CIT, KOLKATA-II, KOLKATA, WHO PASSED THE O RDER U/S. 263 OF THE ACT HAD JURISDICTION OVER THE ASSESSEE. THERE IS N O ORDER TRANSFERRING JURISDICTION FROM ITO, WARD 6(1), KOLKATA UNDER CIT , KOLKATA-II, KOLKATA. THE LD. AR, HOWEVER CONTENDED THAT PAN DA TA IN THE PUBLIC DOMAIN SHOWED THAT THE ASSESSEES JURISDICTION AT T HE RELEVANT TIME WAS WITH ITO, WARD 8(2), KOLKATA, WHO WAS UNDER THE JUR ISDICTION OF CIT, KOLKATA-III, KOLKATA. ITA NO.1104/KOL/2014 (M/S SUBHALAKSHMI VANIJYA PVT. L TD.) & 18 OTHER APPEALS OF DIFFERENT ASSESSEES 147 28.H. IN OUR VIEW THIS OBJECTION IS FRIVOLOUS. IN THE ABSENCE OF ANY ACTUAL TRANSFER OF JURISDICTION, THE ARGUMENT IS WI THOUT ANY FORCE. THE JURISDICTION AS PER PAN DATA IN PUBLIC DOMAIN MAY I NADVERTENTLY SHOW A WRONG FEATURE, BUT THAT WOULD NOT AMOUNT TO TRANSFE RRING THE JURISDICTION, WHICH IS THERE IN REALITY. THE OBJECTION IS REJECTE D. F. WHETHER AN ADDITION IN THE HANDS OF A COMPANY CA N BE MADE U/S 68 IN ITS FIRST YEAR OF INCORPORATION ? 29.A. SHRI SUBHASH AGGARWAL, THE LD. AR OF MADHUB AN VYAPAR PVT. LTD. SUBMITTED THAT THIS COMPANY WAS FORMED ONLY DU RING THE PREVIOUS YEAR RELEVANT TO THE ASSESSMENT YEAR UNDER CONSIDER ATION. PLACING RELIANCE ON THE DECISION OF THE HONBLE SUPREME COU RT IN THE CASE OF BHARAT ENGINEERING, 83 ITR 197 (SC) , HE SUBMITTED THAT IT CANNOT BE POSSIBLE FOR A NEWLY INCORPORATED TO EARN UNDISCLOS ED INCOME OF SUCH A MAGNITUDE IN THE VERY FIRST YEAR OF ITS FORMATION. IT WAS FURTHER SUBMITTED THAT THOUGH THE AFORESAID DECISION RELATE S TO A CASE OF A PARTNERSHIP FIRM, BUT ITS RATIO WILL EQUALLY APPLY TO A PRIVATE LIMITED COMPANY ALSO. A VIEW WAS CANVASSED THAT IN CASE OF ANY DOUBT ABOUT ITA NO.1104/KOL/2014 (M/S SUBHALAKSHMI VANIJYA PVT. L TD.) & 18 OTHER APPEALS OF DIFFERENT ASSESSEES 148 THE SHARE CAPITAL IN THE FIRST YEAR, THE ADDITION U /S 69 COULD BE CONSIDERED ONLY IN THE HANDS OF PROMOTERS AND NOT THE COMPANY U/S 68 OF THE ACT. THE LD. DR OPPOSED THIS CONTENTION. 29.B. WE HAVE CONSIDERED THE RIVAL SUBMISSIONS. THE DECISION IN BHARAT ENGINEERING (SUPRA) , HAS BEEN RENDERED BY THE HONBLE SUPREME COURT IN THE CASE OF A PARTNERSHIP FIRM AND NOT A P RIVATE LIMITED COMPANY. THERE IS A FUNDAMENTAL DIFFERENCE BETWEEN A COMPANY VIS-A- VIS SHAREHOLDERS ON ONE HAND AND A FIRM VIS-A-VIS PARTNERS ON THE OTHER. WHEREAS A COMPANY IS A SEPARATE LEGAL ENTITY DISTIN CT FROM ITS SHAREHOLDERS OR DIRECTORS, IT IS NOT SO IN THE CASE OF PARTNERSHIP FIRM. THE HONBLE SUPREME COURT IN MALABAR FISHERIES COMPANY VS. CIT (1979) 120 ITR 49 (SC) HAS HELD THAT PARTNERS AND FIRM ARE ONE AND THE S AME THING AND A FIRM IS NOTHING BUT A COMPENDIOUS NAME GIVEN TO PARTNERS. SIMILAR VIEW HAS BEEN REITERATED IN THIRD ITO VS ARUNAGIRI CHETTIAR (1996) 220 ITR 232 (SC) IN WHICH IT HAS BEEN HELD THAT TAX ARREARS OF FIRM CAN BE RECOVERED FROM A PERSON WHO WAS A PARTN ER THEREOF IN THE RELEVANT ACCOUNTING YEAR UNDER S. 25 OF THE PARTNER SHIP ACT. IN VIEW OF ITA NO.1104/KOL/2014 (M/S SUBHALAKSHMI VANIJYA PVT. L TD.) & 18 OTHER APPEALS OF DIFFERENT ASSESSEES 149 THE ABOVE PRECEDENTS, IT BECOMES MANIFEST THAT THE RATIO LAID DOWN IN BHARAT ENGINEERING (SUPRA) CANNOT BE APPLIED TO THE FACTS OF THE PRESENT CASE, WHICH IS A COMPANY. THE CONTENTION IS REJECTE D. G. EFFECT OF ORDER PASSED U/S 263 IN THE CASE OF A MALGAMATING COMPANY AFTER AMALGAMATION, 30.A. SH. SUBHASH AGARWAL, THE LEARNED AR REPRESE NTING MADHUBAN VYAPAR PVT. LTD., STATED THAT THE ASSESSEE CEASED T O EXIST ON THE DATE OF PASSING OF THE REVISIONAL ORDER U/S 263 AS IT GOT A MALGAMATED WITH ANOTHER COMPANY PRIOR TO THAT. REFERRING TO THE SCH EME OF ARRANGEMENT WHICH WAS SANCTIONED BY THE HONBLE HIGH COURT, HE POINTED OUT THAT THE DATE OF TRANSFER AS PER THE SCHEME OF AMALGAMATION WAS 10.10.2007. IT WAS STATED THAT ON THE HONBLE HIGH COURT ACCEPTING THE SCHEME OF AMALGAMATION, THE ASSESSEE AS A SEPARATE ENTITY, CE ASED TO EXIST AND HENCE NO PROCEEDINGS COULD HAVE BEEN TAKEN IN THE N AME OF THE AMALGAMATING COMPANY, WHICH IN THE INSTANT CASE IS THE ASSESSEE, MADHUBAN VYAPAR PVT. LTD. TO SUPPORT HIS CONTENTION , HE PLACED ITA NO.1104/KOL/2014 (M/S SUBHALAKSHMI VANIJYA PVT. L TD.) & 18 OTHER APPEALS OF DIFFERENT ASSESSEES 150 RELIANCE ON SARASWATI INDUSTRIAL SYNDICATE VS. CIT 186 ITR 278 (SC) AND R.C. JAIN VS. CIT 273 ITR 384 (DEL) . 30.B. WE DO NOT DISPUTE THE GENERAL PROPOSITION T HAT ONCE A COMPANY GETS AMALGAMATED WITH ANOTHER, IT LOSES ITS ORIGINA L IDENTITY AND NO PROCEEDINGS CAN BE TAKEN IN ITS EARLIER NAME. SUCH PROCEEDINGS HAVE TO CONTINUE IN THE NAME OF THE AMALGAMATED COMPANY AND ORDER CAN ALSO BE PASSED IN THE NEW NAME. HOWEVER, THIS GENERAL PO SITION CAN HAVE NO APPLICATION, WHERE THE REVENUE IS KEPT IN DARK AND IS NOT INFORMED ABOUT SUCH AMALGAMATION. THE POSITION BECOMES MORE CRITIC AL WHERE, EVEN AFTER SUCH AMALGAMATION, THE AMALGAMATING COMPANY L AUNCHES PROCEEDINGS IN ITS OLD NAME. IN SUCH CIRCUMSTANCES, IT CANNOT BE ALLOWED ON TURN AROUND LATER AND CLAIM THAT THOUGH IT WRONG LY INITIATED THE PROCEEDINGS IN WRONG NAME, BUT THE COURT SHOULD HAV E TAKEN COGNIZANCE OF THE REALITY OF AMALGAMATION. NO ASSESSEE CAN BE ALLOWED TO DERIVE BENEFIT FROM ITS OWN FRAUDULENT PRACTICES. 30.C. IT IS OBSERVED IN THE INSTANT CASE DESPITE ITS AMALGAMATION, THE ASSESSEE CHOSE TO FILE ITS RETURN OF INCOME AFTER T HE DATE OF ITA NO.1104/KOL/2014 (M/S SUBHALAKSHMI VANIJYA PVT. L TD.) & 18 OTHER APPEALS OF DIFFERENT ASSESSEES 151 AMALGAMATION, IN ITS EARLIER NAME AND THAT IS HOW T HE ASSESSMENT GOT COMPLETED U/S 147 IN THE SAME NAME. IT IS OBVIOUS T HAT IN SUCH CIRCUMSTANCES, THE ASSESSEE CANNOT BE ALLOWED TO TA KE ADVANTAGE OF ITS OWN MANIPULATION. IT IS FURTHER INTERESTING TO NOTE THAT THE ASSESSEE ALSO ALLOWED THE PROCEEDINGS U/S 147 TO COMPLETE IN ITS EARLIER NAME, BUT IS NOW SEEKING TO OBJECT TO THE ORDER OF THE LD. CIT O N THIS ASPECT OF THE MATTER. LAW DOES NOT PERMIT A PERSON TO BOTH APPROB ATE AND REPROBATE. THIS CONTENTION IS THEREFORE, REJECTED. H. WHETHER ORDER U/S 263 BECOMES INVALID FOR BEING PASSED ON A CLOSED DAY? 31.A. SH. SURANA, THE LD. AR OF SHATABDI VINCOM PVT. LTD. SUBMITTED THAT THE ORDER PASSED BY THE CIT U/S 263 OF THE ACT ON 30.3.2013 WAS NULL AND VOID. IN THIS REGARD, HE POINTED OUT THAT 29TH MARCH, 2013 WAS GOOD FRIDAY, 30TH MARCH, 2013 WAS SATURDAY AND THE 31ST MARCH, 2013 WAS SUNDAY. ALL THESE THREE DAYS WERE CLOSED DAYS . IT WAS BROUGHT TO OUR NOTICE THAT THE CBDT ISSUED AN INSTRUCTION TO T HE AOS FOR KEEPING THE OFFICES OPEN ON 30TH AND 31ST MARCH, 2013, WHIC H DID NOT REQUIRE THE ITA NO.1104/KOL/2014 (M/S SUBHALAKSHMI VANIJYA PVT. L TD.) & 18 OTHER APPEALS OF DIFFERENT ASSESSEES 152 OFFICE OF THE CIT ALSO TO REMAIN OPEN ON SUCH DATE. ACCORDING TO HIM, THE CBDT INSTRUCTION WHICH DERIVE ITS VALIDITY FROM THE PROVISIONS OF SECTION 119 OF THE ACT, CANNOT EXTEND TO DECLARING A GAZETTED HOLIDAY AS A FULL-FLEDGED WORKING DAY FOR THE INCOME-TAX OFFICES . IT WAS THUS PLEADED THAT SINCE THE IMPUGNED ORDER WAS PASSED ON A HOLID AY, THE SAME SHOULD BE HELD AS A NULLITY. IN THIS REGARD, HE PLACED RE LIANCE ON THE FOLLOWING DECISIONS:- I)KULDIP OIL INDUSTRIES LTD. VS. CH.PRATAP SINGH AI R1957 505(ALL); II) ITO VS. SHIVNATHVISWANATH&ORS.19 TTJ 450 (ALL) ; AND III)B & BROTHERS ENGINEERING WORKS &ANR.VS. UOI153 TAXMANN 405 (GUJ). 31.B. WE HAVE GONE THROUGH ALL THE DECISIONS RELI ED BY THE LD. AR. A COMMON THREAD RUNNING THROUGH ALL THESE CASES IS TH AT THE PROCEEDINGS WERE FIXED ON A HOLIDAY, WHICH HAS BEEN HELD TO BE IMPROPER. IN CONTRAST, WE ARE CONFRONTED WITH A SITUATION IN WHICH THE PRO CEEDINGS WERE FIXED FOR LAST HEARING ON 28.3.2013, WHICH WAS WORKING DA Y. IT IS ONLY THAT THE LD. CIT, AFTER CONCLUDING THE PROCEEDINGS, PASSED T HE IMPUGNED ORDER ON A HOLIDAY. THE BAR IN NOT WORKING ON THE HOLIDAYS E XTENDS ONLY QUA THE ITA NO.1104/KOL/2014 (M/S SUBHALAKSHMI VANIJYA PVT. L TD.) & 18 OTHER APPEALS OF DIFFERENT ASSESSEES 153 TAKING UP OF THE PROCEEDINGS INVOLVING PARTICIPATIO N FROM OUTSIDERS. IT CANNOT BE SAID THAT THE GOVERNMENT SERVANTS, HAVING COMPLETED THE HEARING OF THE PROCEEDINGS ON A WORKING DAY, CANNOT WORK ON HOLIDAYS TO CLEAR THEIR WORK WITHOUT THE INVOLVEMENT OF PUBLIC AT LARGE. IT IS A COMMON KNOWLEDGE THAT THE OFFICERS OF THE INCOME-TA X DEPARTMENT WORK AROUND THE CLOCK CLOSE TO VARIOUS LIMITATION P ERIODS, SO AS TO FACILITATE THE COMPLETION OF THEIR WORK IN TIME. IT IS A CAUSE TO APPRECIATE AND NOT TO DEPRECATE. THE SITUATION WOULD HAVE BEEN DIFFERENT IF THE LD. CIT HAD FIXED THE HEARING OF THE CASE ON A HOLIDAY AND ALSO PASSED THE ORDER ON SUCH HOLIDAY. THAT WOULD HAVE RENDERED THE PROCEEDINGS IMPROPER. INSTANTLY, WE ARE CONCERNED WITH A SITUAT ION IN WHICH THE PROCEEDINGS FOR FINAL HEARING WERE RIGHTLY TAKEN UP BY THE LD. CIT ON A WORKING DAY AND IT IS ONLY THAT THE ORDER HAS BEEN PASSED ON A HOLIDAY AFTER CONCLUSION OF SUCH PROCEEDINGS ON A WORKING D AY. IN OUR CONSIDERED OPINION, NO ILLEGALITY CAN BE TRACED FRO M THE PASSING OF THE IMPUGNED ORDER ON A HOLIDAY. ITA NO.1104/KOL/2014 (M/S SUBHALAKSHMI VANIJYA PVT. L TD.) & 18 OTHER APPEALS OF DIFFERENT ASSESSEES 154 31.C. BE THAT AS IT MAY, IT IS NOTED THAT FROM T HE ABOVE DECISION RENDERED BY THE HONBLE ALLAHABAD HIGH COURT IN THE CASE OF KULDIP OIL INDUSTRIES LTD. (SUPRA) , THAT IN CASE OF URGENCY, A TRIAL CAN BE CONDUCTE D EVEN ON A CLOSED HOLIDAY. IN THE PRESENT CASE, THE TIME LIMIT FOR PASSING THE ORDER U/S. 263 OF THE ACT WAS EXPIRING ON 31.3. 2013 AND THEREFORE, THERE WAS AN URGENCY TO PASS THE ORDER BEFORE THAT DATE. THE OBJECTION OF THE ASSESSEE DESERVES TO BE AND IS HEREBY REJECTED. I. WHETHER THE ORDER U/S 263 CAN BE DECLARED AS A N ULLITY FOR THE NOTICE HAVING NOT BEEN SIGNED BY THE CIT ? 32.A. THE LD. AR IN PARAMANI COMMERCIAL PVT. LTD. BROUGHT TO OUR NOTICE THAT THE SHOW CAUSE NOTICE U/S 263 WAS NOT S IGNED. ACCORDING TO HIM, THE ORDER U/S 263 FLOWING FROM SUCH UNSIGNED NOTICE BE DECLARED AS VOID. 32.B. IN OUR CONSIDERED OPINION THIS OBJECTION IS AGAIN UNSUSTAINABLE. WE HAVE NOTICED ABOVE THAT THERE IS NO REQUIREMENT UNDER THE LAW FOR GIVING A NOTICE FOR THE PROCEEDINGS U/S 263 IN CONF ORMITY WITH THE PROVISIONS OF SECTION 282 OF THE ACT. IT HAS BEEN N OTICED THAT THE ASSESSEE ITA NO.1104/KOL/2014 (M/S SUBHALAKSHMI VANIJYA PVT. L TD.) & 18 OTHER APPEALS OF DIFFERENT ASSESSEES 155 SHOULD BE GIVEN AN OPPORTUNITY OF HEARING AND ONCE THIS IS DONE, THE PROCEEDINGS CANNOT BE CHALLENGED ON THIS SCORE. WHE N AN ASSESSEE IS MADE AWARE OF THE PROCEEDINGS U/S 263, NO SUCH OBJE CTION CAN BE ALLOWED TO BE TAKEN. AS THE ASSESSEE IN THE INSTANT CASE WAS AFFORDED OPPORTUNITY OF HEARING THAT WOULD SUFFICE COMPLIANC E WITH THE REQUIREMENTS OF AUDI ALTERM PARTEM CONTEMPLATED BY THE PROVISIONS OF SEC. 263 OF THE ACT. THE OBJECTION RAISED BY THE A SSESSEE IN THIS REGARD, TO SAY THE LEAST, IS FRIVOLOUS. J. CONSEQUENCES OF REFUSAL BY THE REVENUE TO ACCEPT THE WRITTEN SUBMISSIONS OF THE ASSESSEE 33.A. THE LD. ARS IN RADHA KRISHNA TRADCOM PVT. L TD. AND SOME OTHER CASES HAVE BROUGHT TO OUR NOTICE THAT THE REPLIES S ENT BY THE ASSESSEES TO THE SHOW CAUSE NOTICE U/S 263 OF THE ACT WERE RETUR NED AS REFUSED BY THE LD. CIT. IT WAS SUBMITTED THAT SINCE THE OBJECT IONS OF THE ASSESSEE HAVE NOT BEEN CONSIDERED AS CONTAINED IN THOSE LETT ERS, THE IMPUGNED ORDERS BE HELD AS VOID BECAUSE OF LACK OF ADEQUATE OPPORTUNITY TO THE ASSESSEE. ITA NO.1104/KOL/2014 (M/S SUBHALAKSHMI VANIJYA PVT. L TD.) & 18 OTHER APPEALS OF DIFFERENT ASSESSEES 156 33.B. WE DO NOT APPROVE THE WAY IN WHICH THE OFFI CE OF THE CIT HAS REFUSED TO ACCEPT THE WRITTEN SUBMISSIONS MADE ON B EHALF OF VARIOUS ASSESSEES. IT IS IMPERMISSIBLE FOR ANY GOVERNMENT O FFICE TO REFUSE TO ACCEPT ANY LETTER OR COMMUNICATION. IT IS ONLY AFTE R RECEIVING THE LETTER OR COMMUNICATION, THAT THE AUTHORITY CAN DECIDE ABOUT TAKING OR NOT TAKING ITS COGNIZANCE. 33.C. COMING TO THE FACTS OF THE INSTANT CASES, T HE FACT REMAINS THAT SUCH REPLIES WERE SENT BY THESE ASSESSES WHEN THE LD. CI T HAD GIVEN LAST OPPORTUNITIES AND SUCH OPPORTUNITIES WERE NOT AVAIL ED BY THEM. THAT APART, NOT GIVING A PROPER OPPORTUNITY OF HEARING C AN BE NO REASON FOR DECLARING THE ORDER VOID AB INITIO . THE HONBLE SUPREME COURT IN SEVERAL JUDGMENTS INCLUDING GUDUTHUR BROTHERS VS. ITO (1960) 40 ITR 298 (SC), CIT VS. JAI PRAKASH SINGH (1996) 219 ITR 737 (SC) AND KAPURCHAND SHREEMAL VS. CIT (1981) 131 ITR 451 (SC) HAS HELD THAT LACK OF OPPORTUNITY IS SIMPLY AN IRREGULARITY WHICH DOES NOT RENDER THE ORDER PASSED A NULLITY. IN OUR CONSIDERED OPINION, IT IS AT BEST AN IRREGULARITY WHICH WILL NOT AFFECT THE JURISDICTION OF THE CIT U/S. 263 OF ITA NO.1104/KOL/2014 (M/S SUBHALAKSHMI VANIJYA PVT. L TD.) & 18 OTHER APPEALS OF DIFFERENT ASSESSEES 157 THE ACT. WE HOLD ACCORDINGLY AND DISMISS THE PLEA RAISED BY THE ASSESSEES ON THIS ISSUE. K. SEARCH PROCEEDINGS AND REVISION OF ABATED ORDER U/S 263 34.A. THE LD. AR APPEARING FOR M/S HEBISCUS COMMO TRADE PVT. LTD. STATED THAT CONSEQUENT TO A SEARCH U/S.132 OF THE A CT IN THE CASE OF SOME OTHER ASSESSEE AND DISCOVERY OF MATERIAL BELONGING TO THE ASSESSEE IN SUCH SEARCH, PROCEEDINGS U/S.153C OF THE ACT WERE I NITIATED AGAINST THE ASSESSEE. A NOTICE WAS ISSUED FOR FILING RETURN IN RESPECT OF SIX YEARS INCLUDING THE YEAR FOR WHICH THE ASSESSEE IS BEFORE US. IT WAS CONTENDED THAT ONCE THE PROCEEDINGS U/S.153C OF THE ACT WERE INITIATED, THE CIT COULD NOT HAVE INVOKED THE POWERS U/S. 263 OF THE A CT FOR REVISING AN ORDER OF ASSESSMENT ALREADY PASSED BY THE ASSESSING AUTHORITY UNDER U/S. 147 OF THE ACT IN RESPECT OF AN ASSESSMENT YEAR WHI CH IS COMPRISED IN THE PERIOD OF SIX ASSESSMENT YEARS COVERED BY THE F IRST PROVISO TO SEC. 153A OF THE ACT. HIS SUBMISSION WAS THAT THE CIT U /S. 263 OF THE ACT HAS TO EXAMINE THE RECORDS OF ASSESSMENT FOR EXERCI SING JURISDICTION. THE RECORDS OF ASSESSMENT FOR THE PURPOSE OF SECTIO N 263 OF THE ACT ITA NO.1104/KOL/2014 (M/S SUBHALAKSHMI VANIJYA PVT. L TD.) & 18 OTHER APPEALS OF DIFFERENT ASSESSEES 158 WOULD INCLUDE THE RECORDS AS ON THE DATE OF ISSUE O F SHOW CAUSE NOTICE. HE STATED THAT THE LD. CIT HAD FULL KNOWLEDGE OF TH E FACT OF PROCEEDINGS U/S. 153C OF THE ACT HAVING BEEN INITIATED AGAINST THE ASSESSEE ON 15.11.2012 AND AS SUCH HE COULD NOT HAVE REVISED TH E ORDER PASSED U/S 147, WHICH WAS ABATED. HE DREW OUR ATTENTION TO THE PROVISIONS OF SEC.153A OF THE ACT, FOR CONTENDING THAT WHENEVER A SEARCH IS CONDUCTED AFTER 31.5.2003, THEN THE AO HAS NO OTHER OPTION BU T TO ISSUE NOTICE U/S.153A OF THE ACT AND THEN ASSESS OR REASSESS TOT AL INCOME FOR THE SIX ASSESSMENT YEARS IMMEDIATELY PRECEDING THE ASSESSME NT YEAR RELEVANT TO THE PREVIOUS YEAR IN WHICH SUCH SEARCH IS CONDUCTED . ACCORDING TO HIM, SIMILAR WOULD BE THE POSITION EVEN IN THE CASE OF P ROCEEDINGS U/S. 153C OF THE ACT. HIS FURTHER SUBMISSION WAS THAT THE EX PRESSION ASSESS OR REASSESS USED IN SEC.153A(1)(B) OF THE ACT HAS NOT BEEN DEFINED AND THEREFORE HAS TO BE UNDERSTOOD BY KEEPING IN MIND T HE SECOND PROVISO TO SEC.153A(1) OF THE ACT, WHICH LAYS DOWN THAT ASSESS MENT OR REASSESSMENT, IF ANY, RELATING TO ANY ASSESSMENT YE AR FALLING WITHIN THE PERIOD OF SIX ASSESSMENT YEARS REFERRED TO IN SEC. 153A(1)((B) OF THE ACT, ITA NO.1104/KOL/2014 (M/S SUBHALAKSHMI VANIJYA PVT. L TD.) & 18 OTHER APPEALS OF DIFFERENT ASSESSEES 159 WHICH IS PENDING ON THE DATE OF INITIATION OF SEARC H U/S.132 OF THE ACT, SHALL ABATE. IF AN ASSESSMENT FOR ANY OF THE ASSES SMENT YEARS FALLING WITHIN THE SIX ASSESSMENT YEARS REFERRED TO IN SEC. 153A(1)(B) OF THE ACT IS ALREADY COMPLETED BEFORE THE DATE OF INITIATION OF SEARCH U/S.132 OF THE ACT, THEN ASSESSMENT OF TOTAL INCOME FOR SUCH YEAR U/S.153A OF THE ACT CAN ONLY BE REASSESSED AND NOT ASSESSED. THE E XPRESSION REASSESSED WOULD INCLUDE REASSESSMENT PURSUANT TO ORDER U/S.153A OF THE ACT. HE SUBMITTED THAT THE PURPOSE OF THE SECO ND PROVISO TO SEC. 153A(1) OF THE ACT IS TO ENSURE THAT THERE ARE NO M ULTIPLE ASSESSMENTS FOR THE SAME ASSESSMENT YEAR. IN THIS REGARD OUR ATTEN TION WAS DRAWN TO THE DECISION OF THE HONBLE DELHI HIGH COURT IN CIT VS. ANIL KUMAR BHATIA 211 TAXMAN 453 (DELHI) WHEREIN IT HAS BEEN HELD IN PARA 21 AS UNDER : - 21. NOW THERE CAN BE CASES WHERE AT THE TIME WHEN T HE SEARCH IS INITIATED OR REQUISITION IS MADE, THE ASSESSMENT OR REASSESSMENT PROCEEDINGS RELATING TO ANY ASSESSMENT YEAR FALLING WITHIN THE PERIOD OF THE SIX ASSESSMENT YEARS MENTIONED ABOVE, MAY BE PENDING. IN SUCH A CASE, THE SECOND PROVISO TO SUB SECTION (1) OF SECTION 153A SAYS THAT SUCH PROCEEDINGS 'SHALL ABAT E'. THE REASON IS NOT FAR TO SEEK. UNDER SECTION 153A, THERE IS NO ROOM FOR MULTIPLE ASSESSMENT ORDERS IN RESPECT OF ANY OF THE SIX ASSESSMENT YEARS UNDER CONSIDERATION. THAT IS BECAUSE THE ASSE SSING OFFICER ITA NO.1104/KOL/2014 (M/S SUBHALAKSHMI VANIJYA PVT. L TD.) & 18 OTHER APPEALS OF DIFFERENT ASSESSEES 160 HAS TO DETERMINE NOT MERELY THE UNDISCLOSED INCOME OF THE ASSESSEE, BUT ALSO THE 'TOTAL INCOME' OF THE ASSESS EE IN WHOSE CASE A SEARCH OR REQUISITION HAS BEEN INITIATED. OBVIOUSLY THERE CANNOT BE SEVERAL ORDERS FOR THE SAME ASSESSMENT YEAR DETERMI NING THE TOTAL INCOME OF THE ASSESSEE. IN ORDER TO ENSURE THIS STA TE OF AFFAIRS NAMELY, THAT IN RESPECT OF THE SIX ASSESSMENT YEARS PRECEDING THE ASSESSMENT YEAR RELEVANT TO THE YEAR IN WHICH THE S EARCH TOOK PLACE THERE IS ONLY ONE DETERMINATION OF THE TOTAL INCOME , IT HAS BEEN PROVIDED IN THE SECOND PROVISO OF SUB SECTION (1) O F SECTION 153A THAT ANY PROCEEDINGS FOR ASSESSMENT OR REASSESSMENT OF THE ASSESSEE WHICH ARE PENDING ON THE DATE OF INITIATIO N OF THE SEARCH OR MAKING REQUISITION 'SHALL ABATE'. ONCE THOSE PROCEE DINGS ABATE, THE DECKS ARE CLEARED, FOR THE ASSESSING OFFICER TO PAS S ASSESSMENT ORDERS FOR EACH OF THOSE SIX YEARS DETERMINING THE TOTAL INCOME OF THE ASSESSEE WHICH WOULD INCLUDE BOTH THE INCOME DE CLARED IN THE RETURNS, IF ANY, FURNISHED BY THE ASSESSEE AS WELL AS THE UNDISCLOSED INCOME, IF ANY, UNEARTHED DURING THE SEARCH OR REQU ISITION. 34.B. THE LEARNED AR SUBMITTED THAT ASSESSMENT IN THE CASE OF THE ASSESSEE U/S. 147 OF THE ACT FOR THE AY 2010-11 WAS COMPLETED ON 21.2.2012 AND THE PROCEEDINGS U/S.153C OF THE ACT W ERE INITIATED ON 5.11.2012. THE CRUX OF HIS ARGUMENT WAS THAT THERE CAN BE NO REVISION OF AN ABATED ASSESSMENT ORDER. IN SUPPORT OF HIS S TAND, THE LEARNED AR RELIED ON CANARA HOUSING DEVELOPMENT COMPNAY VS. DCIT (2014) 114 DTR 162 (KARN) . THE SUBMISSION OF THE LEARNED DR ON THE OTHER HA ND ITA NO.1104/KOL/2014 (M/S SUBHALAKSHMI VANIJYA PVT. L TD.) & 18 OTHER APPEALS OF DIFFERENT ASSESSEES 161 WAS THAT SUCH AN ASSESSMENT CAN BE VALIDLY REVISED IN EXERCISE OF POWERS U/S. 263 OF THE ACT, EVEN AFTER THE INITIATION OF S EARCH U/S.132 OF THE ACT. 34.C. WE HAVE CONSIDERED THE RIVAL SUBMISSIONS. WE SHALL FIRST CONSIDER THE SCOPE OF ASSESSMENT U/S.153A OF THE AC T. THE SPECIAL BENCH OF THE TRIBUNAL IN ALLCARGO GLOBAL LOGISTICS LTD. (2012) 16 ITR (TRIB.) 380 (MUM)(SB) HAD THE OCCASION TO CONSIDER THE FOLLOWING QUESTION: - 1. WHETHER, ON THE FACTS AND IN LAW, THE SCOPE OF ASSESSMENT U/S 153A ENCOMPASSES ADDITIONS, NOT BASED ON ANY INCRIM INATING MATERIAL FOUND, DURING THE COURSE OF SEARCH'? THE SPECIAL BENCH ANSWERED THE QUESTION BY HOLDING THAT: (A) IN SO FAR AS PENDING ASSESSMENTS ARE CONCERNED , THE JURISDICTION TO MAKE ORIGINAL ASSESSMENT AND ASSESS MENT U/S 153A MERGE INTO ONE AND ONLY ONE ASSESSMENT FOR EACH ASS ESSMENT YEAR SHALL BE MADE SEPARATELY ON THE BASIS OF THE FINDIN GS OF THE SEARCH AND ANY OTHER MATERIAL EXISTING OR BROUGHT ON THE R ECORD OF THE AO, (B) IN RESPECT OF NON-ABATED ASSESSMENTS, THE ASSES SMENT WILL BE MADE ON THE BASIS OF BOOKS OF ACCOUNT OR OTHER DOCU MENTS NOT PRODUCED IN THE COURSE OF ORIGINAL ASSESSMENT BUT F OUND IN THE COURSE OF SEARCH, AND UNDISCLOSED INCOME OR UNDISCL OSED PROPERTY DISCOVERED IN THE COURSE OF SEARCH ITA NO.1104/KOL/2014 (M/S SUBHALAKSHMI VANIJYA PVT. L TD.) & 18 OTHER APPEALS OF DIFFERENT ASSESSEES 162 34.D. IN THE LIGHT OF THE ABOVE RULING OF THE SP ECIAL BENCH, IT IS CLEAR THAT IF AN ASSESSMENT IS COMPLETED PRIOR TO INITIAT ION OF SEARCH U/S.132 OF THE ACT AND IF NO INCRIMINATING MATERIAL IS FOUND R EGARDING A PARTICULAR ITEM OF INCOME DURING THE COURSE OF SEARCH, THEN NO ADDITION CAN BE MADE IN THE ASSESSMENT OF SUCH YEAR U/S. 153A OF TH E ACT. IF WE ACCEPT THE CONTENTION OF THE LD. AR, THEN THE REVENUE WOUL D BE LEFT WITHOUT ANY REMEDY IF SUCH AN ORDER PASSED BY THE AO IS FOUND T O BE ERRONEOUS AND PREJUDICIAL TO THE INTEREST OF THE REVENUE. IN OUR CONSIDERED VIEW, IN SUCH CASES IT WOULD BE OPEN TO THE REVENUE TO EXPLORE RE MEDIES OPEN TO IT IN LAW U/S. 263 OF THE ACT, SUBJECT TO SATISFACTION OF THE CONDITIONS PRECEDENT FOR EXERCISE OF JURISDICTION UNDER THAT P ROVISION, EVEN AFTER THE INITIATION OF SEARCH U/S.132 OF THE ACT. IN SUCH C IRCUMSTANCES, WE ARE OF THE VIEW THAT THE PLEA PUT FORTH BY THE ASSESSEE CA NNOT BE ACCEPTED. THE QUESTION OF THE ASSESSEE HAVING TO FACE MULTIPLE PR OCEEDINGS, IN THE PRESENT CASE, CANNOT BE THE BASIS TO HOLD THAT JURI SDICTION U/S.263 OF THE ACT CANNOT BE INVOKED. THE ARGUMENT RAISED BY THE ASSESSEE ON THIS COUNT IS NOT ACCEPTABLE. ITA NO.1104/KOL/2014 (M/S SUBHALAKSHMI VANIJYA PVT. L TD.) & 18 OTHER APPEALS OF DIFFERENT ASSESSEES 163 34.E. IT IS NO DOUBT TRUE THAT THE HONBLE KARNA TAKA HIGH COURT IN THE CASE OF CANARA HOUSING (SUPRA) HAS NOT ACCEPTED THE RULING OF THE SPECIAL BENCH IN THE CASE OF ALLCARGO LOGISTICS (SUPRA) . HOWEVER, THE HONBLE BOMBAY HIGH COURT IN THE CASE OF CIT VS. CONTINENTAL WAREHOUSING CORPORATION ITA NO.523/2013 VIDE ITS JUDGMENT DATED 21.4.2015, AFTER REFERRING TO THE DECISION OF THE H ONBLE DELHI HIGH COURT IN THE CASE OF ANIL KUMAR BHATIA (SUPRA) AND THAT OF THE HONBLE KARNATAKA HIGH COURT IN CANARA HOUSING (SUPRA) HAS TAKEN A VIEW THAT THE DECISION RENDERED BY THE SPECIAL BENCH IS TO BE FOLLOWED. NO DECISION OF THE HONBLE CALCUTTA HIGH COURT ON THE POINT HAS BEEN BROUGHT TO OUR NOTICE. WE ARE OF THE OPINION THAT THE VIEW EXPRESSED BY THE HONBLE BOMBAY HIGH COURT, WHICH IS IN TUNE WI TH THE DECISION RENDERED BY THE SPECIAL BENCH IN THE CASE OF ALLCARGO LOGISTICS (SUPRA), SHOULD TO BE FOLLOWED. IT IS, THEREFORE, HELD THAT THE PROCEEDINGS U/S. 263 OF THE ACT TO REVISE THE ORDER DATED 21.2.2013 PASS ED BY THE AO U/S. 147 OF THE ACT, ARE VALID AND CANNOT HELD TO BE WITHOUT JURISDICTION. ACCORDINGLY, THIS ISSUE IS ALSO DECIDED AGAINST THE ASSESSEE. ITA NO.1104/KOL/2014 (M/S SUBHALAKSHMI VANIJYA PVT. L TD.) & 18 OTHER APPEALS OF DIFFERENT ASSESSEES 164 35. BEFORE PARTING WITH THIS ORDER, WE WANT TO M AKE IT CLEAR THAT ALL THE DECISIONS CITED BY BOTH THE SIDES HAVE BEEN DULY TA KEN INTO CONSIDERATION WHILE DRAWING OUR CONCLUSIONS ON THE POINTS UNDER C ONSIDERATION. SPECIFIC REFERENCE TO SOME OF THE DECISIONS CITED I N THE ORDER HAS BEEN AVOIDED EITHER DUE TO THEIR REPETITIVE NATURE OR TO RELIEVE THE ORDER FROM UNNECESSARY REPETITIONS. 36. IN THE RESULT, ALL THE APPEALS ARE DISMISSED. THE ORDER PRONOUNCED IN THE OPEN COURT ON 30.07.201 5. SD/- SD/- [N.V. VASUDEVAN] [R.S. SYAL] JUDICIAL MEMBER ACCOUNTANT MEMBER DATED,30 TH JULY, 2015. DK COPY FORWARDED TO: 1. APPELLANT 2. RESPONDENT 3. CIT 4. CIT (A) 5. DR, ITAT AR, ITAT, NEW DELHI.