M/s. RBS Credit & Financial Development Pvt. Ltd., , Kolkata V. Pr.CIT - 3, Kolkata , Kolkata

ITA 1156/KOL/2017

• Counselvise Citation: [2018] 126 COUNSELVISE.COM (IT) 1402 (ITAT-KOLKATA)
• Duration Of Justice: 9 month(s) 21 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 09-03-2018
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: B
• Assessment Year: 2012-2013
• Appeal Filed On: 19-05-2017
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Keywords: Share purchase agreement; Source of fund; Deemed dividend; Assessment record; Capital receipt
• Section: 143(3); 14A; 133(6); 131; 68; 263

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL B BENCH : KOLKATA [BEFORE HONBLE SHRI ABY. T. VARKEY, JM & SHRI M. BALAGANESH, AM ] I.T.A NO. 1156/KOL/20 17 ASSESSMENT YEAR : 2012-1 3 M/S RBS CREDIT & FINANCIAL DEVELOPMENT PVT. LTD. -VS- PCIT-3, KOLKATA [PAN: AABCR 3300 A] (APPELLANT) ( RESPONDENT) FOR THE APPELLANT : SHRI RAVI TULSIYAN , FCA FOR THE RESPONDENT : SHRI MD. USMAN, CIT(DR) DATE OF HEARING : 27.02.2018 DATE OF PRONOUNCEMENT : 09.03.2018 ORDER PER M.BALAGANESH, AM 1. THIS APPEAL BY THE ASSESSEE ARISES OUT OF THE O RDER OF THE LEARNED PRINCIPAL COMMISSIONER OF INCOME TAX-3, KOLKATA [IN SHORT THE LD. CIT] IN MEMO NO. PR. CIT- 3/HQRS.-3/KOL/U/S263/WD-8(3)/113/2016-17/16346-1634 9 DATED 08.03.2016 PASSED U/S 263 OF THE ACT AGAINST THE ORDER PASSED BY THE DCIT, CIRCLE-8(2), KOLKATA [IN SHORT THE LD. AO] UNDER SECTION 143(3) OF THE INCOME TAX ACT, 1961 [IN SHORT THE ACT] DATED 31.03.2015 FOR THE ASSESSMENT YEAR 2012-13. 2. THE ONLY ISSUE TO BE DECIDED IN THIS APPEAL IS A S TO WHETHER THE LD CIT WAS JUSTIFIED IN INVOKING REVISIONARY JURISDICTION U/S 263 OF THE ACT IN THE FACTS AND CIRCUMSTANCES OF THE CASE. 2 ITA NO.1156/KOL/2017 M/S RBS CREDIT & FINANCIAL DEVELOPMENT PVT. LTD. A.YR.2012-13 2 3. THE BRIEF FACTS OF THIS ISSUE IS THAT THE ASSESS EE IS A NON-BANKING FINANCE COMPANY (NBFC) ENGAGED IN INVESTMENT OF SHARES AND OTHER TR ADING BUSINESS. THE RETURN OF INCOME FOR THE ASST YEAR 2012-13 WAS FILED BY THE A SSESSEE COMPANY ON 27.9.2012 DECLARING TOTAL INCOME OF RS NIL. THE ASSESSMENT WAS COMPLETED U/S 143(3) OF THE ACT ON 31.3.2015 DETERMINING THE TOTAL INCOME OF RS 3,31,87,540/- AFTER MAKING ADDITION OF RS 2,79,00,000/- ON ACCOUNT OF SHARE AP PLICATION MONEY BY APPLYING THE PROVISIONS OF SECTION 68 OF THE ACT AND ADDITION OF RS 91,65,000/- ON ACCOUNT OF DEEMED DIVIDEND U/S 2(22)(E) OF THE ACT AND FURTHER DISALLOWANCE OF RS 78,45,083/- U/S 14A OF THE ACT. LATER THE LD CIT ASSUMED JURISDICT ION U/S 263 OF THE ACT AND ISSUED SHOW CAUSE NOTICE DATED 9.2.2017 AND SUPPLEMENTAR Y SHOW CAUSE NOTICE DATED 28.2.2017, ALLEGING THAT THE ASSESSMENT ORDER PASSE D IN THE ASSESSEES CASE U/S 143(3) OF THE ACT BY THE LD AO FOR THE ASST YEAR WAS PRIMA FACIE, ERRONEOUS AND PREJUDICIAL TO THE INTERESTS OF THE REVENUE ON THE FOLLOWING GROUN DS:- A) THAT THE ASSESSEE HAVING ISSUED 1457000 EQUITY S HARES OF RS 10 EACH AT A PREMIUM OF RS 15 PER SHARE AND THEREAFTER RAISING S HARE CAPITAL OF RS 1,45,74,000/- AND SHARE PREMIUM OF RS 2,18,61,000/- CANNOT BE CONSIDERED AS GENUINE SINCE THE ASSESSEE WAS NOT INVOLVED IN ANY GENUINE BUSINESS ACTIVITY AND SOURCE OF FUND FOR SHARE APPLICATION WAS DOUBTF UL. IN VIEW OF THE ABOVE, IT WAS ALLEGED THAT SINCE THE LD AO HAD FAILED TO APPL Y THE PROVISIONS OF SECTION 68 OF THE ACT AND HAD PASSED THE ASSESSMENT ORDER WITH OUT MAKING ENQUIRIES OR VERIFICATION AND NOT IN ACCORDANCE WITH THE DECISIO N OF HONBLE JURISDICTIONAL HIGH COURT IN THE CASE OF RAJMANDIR ESTATES PVT LTD VS PCIT REPORTED IN (2016) 70 TAXMANN.COM 124 (CAL) , THE ASSESSMENT ORDER SO PASSED BY THE LD AO U/S 143(3) OF THE ACT IS PRIMA FACIE ERRONEOUS AND PREJ UDICIAL TO THE INTERESTS OF THE REVENUE. 3 ITA NO.1156/KOL/2017 M/S RBS CREDIT & FINANCIAL DEVELOPMENT PVT. LTD. A.YR.2012-13 3 B) THAT THE ASSESSEE HAVING VALUED CLOSING STOCK AT RS 1,15,07,191/- UNDER THE HEAD CHANGES IN INVENTORIES OF FINISHED GOODS , WI P AND STOCK IN TRADE IN SCHEDULE 13 OF ITS PROFIT AND LOSS ACCOUNT FOR THE RELEVANT ASST YEAR WHEREAS BOOK VALUE OF CLOSING STOCK WAS RS 1,22,37,799/-, T HE SAME HAS RESULTED IN NOTIONAL LOSS OF RS 7,30,608/- (1,22,37,799 1,15, 07,191) , AS CHANGES IN INVENTORIES OF SHARES & SECURITIES WAS DEBITED TO P ROFIT AND LOSS ACCOUNT AND THE LOSS BEING CONTINGENT IN NATURE, THE SAME CANNOT BE ALLOWED TO BE SET OFF AGAINST THE TAXABLE INCOME AND AS PER CBDT INSTRUCTION NO. 3/2010 THIS NOTIONAL LOSS SHOULD HAVE BEEN ADDED BACK TO THE ASSESSEES TOTAL INCOME. IN VIEW OF THE ABOVE, THE LD CIT ALLEGED THAT SINCE THE LD AO HAD PASSED THE ASSESSMENT ORDER U/S 143(3) OF THE ACT WITHOUT MAKING ENQUIRIES OR V ERIFICATION, THE ASSESSMENT ORDER SO PASSED BY THE LD AO U/S 143(3) OF THE ACT IS PRIMA FACIE ERRONEOUS AND PREJUDICIAL TO THE INTERESTS OF THE REVENUE. 4. IN RESPONSE TO THE SHOW CAUSE NOTICES ISSUED, TH E ASSESSEE FILED WRITTEN SUBMISSIONS EXPLAINING THE DETAILS WHY THE ASSESSMENT ORDER CAN NOT BE HELD TO BE ERRONEOUS AND PREJUDICIAL TO THE INTERESTS OF THE REVENUE. HOWE VER, THE LD PR CIT PROCEEDED TO PASS THE ORDER U/S 263 OF THE ACT ON 8.3.2017 BY OBSERVI NG THAT THE IMPUGNED ASSESSMENT ORDER HAS NOT CONSIDERED THE PROVISIONS OF SECTION 68 OF THE ACT AND THE DECISION OF HONBLE JURISDICTIONAL HIGH COURT SUPRA IN RELATION TO THE ISSUE OF RECEIPT OF SHARE APPLICATION MONEY AND FURTHER OBSERVING THAT THE LD AO HAD FAILED TO MAKE ANY ENQUIRY IN RESPECT OF ISSUE OF DEBITING THE DIFFERENTIAL VA LUE OF CLOSING STOCK OF SHARES IN THE PROFIT AND LOSS ACCOUNT OF THE ASSESSEE THEREBY MAK ING THE IMPUGNED ORDER ERRONEOUS AND PREJUDICIAL TO THE INTERESTS OF THE REVENUE. AG GRIEVED, THE ASSESSEE IS IN APPEAL BEFORE US ON THE FOLLOWING GROUNDS:- 4 ITA NO.1156/KOL/2017 M/S RBS CREDIT & FINANCIAL DEVELOPMENT PVT. LTD. A.YR.2012-13 4 1. THAT, ON THE FACTS AND IN THE CIRCUMSTANCES OF T HE CASE, THE LD. PRINCIPAL CIT ERRED IN LAW IN ASSUMING JURISDICTION U/S. 263 OF THE ACT ON MERE POSSIBILITIES AND GUESS WORK IN ORDER TO IMPOSE HIS OWN VIEWS ON THE A.O. ON THE SAME SET OF FACTS & EVIDENCES CONSIDERED BY THE A.O., BY HOLDIN G THAT THE ORDER PASSED BY THE A.O. U/S. 143(3) OF THE ACT ON 31.03.2015 WAS P RIMA FACIE ERRONEOUS AND PREJUDICIAL TO THE INTERESTS OF THE REVENUE. 2. THAT, THE LD. PR. CIT ERRED IN ASSUMING JURISDIC TION U/S.263 ON HIS ALLEGED ASSUMPTION THAT THE A.O. HAS NOT DISCUSSED IN THE A SSESSMENT ORDER THE GENUINENESS OF ISSUANCE OF 14,57,400 SHARES OF FACE VALUE OF RS.10/- (RS.1,45,74,000) AT A PREMIUM OF RS.15/- PER SHARE (RS.2,18,61,000) WHEN AS PER RECORD VIDE ORDER SHEET ENTRY DATED 05.03.2016 THE A.O. HAD IN-DEPTH ENQUIRED/VERIFIED THE DETAILS OF SOURCE OF THE ENTI RE SHARE CAPITAL RECEIVED FROM THE GROUP COMPANIES WITH SUPPORTING DOCUMENTS, LEAV ING NO SCOPE IN LAW TO INTERFERE WITH U/S.263 OF THE ACT. 3. THAT, THE LD. PR. CIT OUGHT TO HAVE CONSIDERED T HAT ADDITION OF RS.2.79 CRORES MADE U/S.68 IN THE IMPUGNED ASSESSMENT ORDER HAS RATHER CAUSED PREJUDICE TO THE ASSESSEE AND NOT THE REVENUE, INAS MUCH AS THE SHARE APPLICATION MONEY OF RS.1,36,65,000/-, IF AT ALL, C OULD HAVE BEEN SUBJECTED TO SEC.68, WHEREAS THE A.O. WENT AHEAD TO ADD A SUM OF RS.2.79 CRORES U/S.68 OF THE ACT, WHICH WAS IN EXCESS OF SHARE APPLICATION M ONEY ACTUALLY RECEIVED BY THE ASSESSEE. 4. THAT, THE LD. PR. CIT FACTUALLY WENT WRONG IN AS SUMING THAT THE A.O. HAS NOT CONSIDERED THAT THE ASSESSEE WAS NOT INVOLVED IN AN Y GENUINE BUSINESS ACTIVITY, WHEREAS THE ASSESSEE BEING A NBFC HAS GENUINE & SUB STANTIAL BUSINESS ACTIVITIES AND AS PER P/L ACCOUNT VERIFIED BY THE A .O., TOTAL RECEIPTS IN THE NATURE OF DIVIDEND, PROFIT ON SALE OF INVESTMENT & INTEREST AMOUNTED TO RS.1,76,71,978/- AND THERE WAS NET PROFIT OFRS.46,2 9,111/-. 5. THAT, THE LD. PR. CIT ERRED IN ASSUMING THAT THE A.O. FAILED TO INQUIRE INTO THE CREDITWORTHINESS OF THE SHAREHOLDERS IN SPITE O F THE FACT THAT ALL THE SHARE APPLICANTS BEING THE ASSESSEE'S GROUP COMPANIES, TH E SOURCE OF THE ASSESSEE'S SHARE CAPITAL AND SHARE PREMIUM WAS FROM WITHIN THE ASSESSEE-GROUP AND THEIR BALANCE SHEETS PROVED AVAILABILITY OF SUFFICIENT FU NDS TO INVEST, WHICH STOOD VERIFIED BY THE A.O. VIDE ORDER SHEET ENTRY DATED 0 5.03.2015 AND HENCE CANNOT BE DOUBTED. 6. THAT, THE LD. PR. CIT WHILE ADMITTING THAT THE A .O. MADE CERTAIN ENQUIRIES IN REGARD TO RECEIPT OF SHARE APPLICATION MONEY FURTHE R ERRED IN ALLEGING THAT NO ENQUIRY WAS MADE BY HIM TO RULE OUT THE POSSIBILITY OF THE TRANSACTION BEING 5 ITA NO.1156/KOL/2017 M/S RBS CREDIT & FINANCIAL DEVELOPMENT PVT. LTD. A.YR.2012-13 5 COLLUSIVE AND SHAM IN SPITE OF THE FACT THAT DEPOSI TIONS U/S.131 (1) FROM THE DIRECTORS OF THE SHAREHOLDER COMPANIES WERE RECORDE D/CONSIDERED AT PAR WITH SUPPORTING AUTHENTIC EVIDENCE, THUS NEGATING ANY AV ENUES OF NOT CONDUCTING ANY ENQUIRY OR CONDUCTING INADEQUATE ENQUIRIES. 7. THAT, THE LD. PR. CIT HAS WRONGLY ALLEGED THAT T HE A.O. HAS NOT EVEN EXAMINED THE BANK ACCOUNTS OF THE SHARE SUBSCRIBERS WHEN AS PER RECORD, BANK STATEMENTS OF THE SHARE SUBSCRIBERS AND THE ASSESSE E REFLECTING DEBIT AND CREDIT ENTRIES RESPECTIVELY HAD BEEN VERIFIED BY THE A.O., WHO ULTIMATELY MADE ADDITION OF RS.2.79 CRORES U/S. 68 OF THE ACT ON THAT ACCOUN T. 8. THAT, THE LD. PR. CIT ON MISINTERPRETATION HAS A LLEGED THAT BOOK VALUE OF CLOSING STOCK WAS SHOWN AT RS.1,22,37,191/-, WHEREA S AS PER PIL ACCOUNT THE SAME WAS SHOWN AT RS.1,15,07,191/- UNDER THE HEAD ' CHANGES IN INVENTORIES OF FINISHED GOODS, WIP & STOCK-IN-TRADE' AND HENCE THE NOTIONAL LOSS OF RS. 7,30,608/- CANNOT BE ALLOWED TO BE SET OFF WITHOUT CONSIDERING THAT THE ASSESSEE HAS TAKEN CLOSING STOCK OF SHARE SCRIPS AT LOWER OF COST PRICE OR NET REALIZABLE VALUE/MARKET VALUE IN ACCORDANCE WITH AS-2. 9. THAT, THE LD. PRINCIPAL CIT GROSSLY ERRED ON FAC TS AND IN LAW IN INVOKING JURISDICTION U/S. 263 OF THE ACT AND REFERRING THE CASE BACK TO THE A.O. FOR FRESH EXAMINATION OF ADDITION U/S. 68 OF THE ACT. 10. THAT, THE LD. PR. CIT WRONGLY INVOKED PROVISION S OF SEC. 263 AGAINST THE SETTLED LAW THAT WHEN THE A.O. FORMS AN OPINION AND FRAMES ASSESSMENT ON THE BASIS OF HIS ENQUIRY AND VERIFICATION OF THE DOCUME NTS REQUISITIONED AND AVAILABLE ON RECORD, EVEN IF INADEQUATE, THE SAME D OES NOT MEAN NO ENQUIRY AT ALL, INASMUCH AS INADEQUATE ENQUIRY BY ITSELF DOES NOT GIVE OCCASION TO INVOKE PROVISIONS OF SEC. 263 MERELY BECAUSE THE LD. PR. C IT HAS DIFFERENT OPINION IN THE MATTER. 11. THAT, THE LD. PR. CIT WITHOUT BRINGING ON RECOR D ANY CONCLUSIVE MATERIAL/EVIDENCE TO PROVE THAT THE VIEW TAKEN BY T HE A.O. WAS UNSUSTAINABLE IN LAW HAS TERMED THE ASSESSMENT ORDER ERRONEOUS AND P REJUDICIAL TO THE INTERESTS OF REVENUE WHEN IT IS SETTLED LAW THAT SATISFACTION OF THE A.O. WHO MADE ENQUIRY SHOULD BE THE TOUCHSTONE TO BASE THE VALIDITY OF TH E ASSESSMENT ORDER AND THE CIT CANNOT SUBSTITUTE HIS SUBJECTIVE VIEW IN PLACE OF FINDINGS OF THE A.O. 12. THAT, FURTHER THE ASSUMPTION OF JURISDICTION U/ S. 263 AND PASSING CONSEQUENTIAL ORDER BY THE LD. PR. CIT WAS BAD IN L AW INASMUCH AS IT IS A SETTLED LAW THAT THE PHRASE 'PREJUDICIAL TO THE INT ERESTS OF THE REVENUE' HAS TO BE READ IN CONJUNCTION WITH THE EXPRESSION 'ERRONEOUS' AND MERELY THAT THE A.O. 6 ITA NO.1156/KOL/2017 M/S RBS CREDIT & FINANCIAL DEVELOPMENT PVT. LTD. A.YR.2012-13 6 HAS NOT DISCUSSED THE INQUIRY CARRIED OUT AND ITS O UTCOME IN THE ASSESSMENT ORDER DOES NOT MEAN THAT THE ASSESSMENT ORDER WAS E RRONEOUS. 13. THAT, EVEN ON MERITS OF THE CASE, THE ORDER PAS SED BY THE LD. PR. CIT U/S. 263 IS DEVOID OF ANY MERIT AND AGAINST THE SETTLED LAW INASMUCH AS ALL THE REQUIRED DETAILS/INFORMATION/EVIDENCES REQUIRED TO BE PRODUCED IN ESTABLISHING IDENTITY & CREDITWORTHINESS OF THE SHAREHOLDERS (GR OUP COMPANIES) AND GENUINENESS OF THE TRANSACTION ARE ALREADY ON RECOR D AND EXPLAINED BEFORE HIM AND HENCE THE CONDITIONS PRECEDENT TO INVOKE SEC.68 HAVE NOT BEEN SATISFIED IN THIS CASE. 14. THAT, AS THE ORDER OF LD. PR. CIT ON THE ABOVE ISSUES SUFFERS FROM ILLEGALITY AND IS DEVOID OF ANY MERIT, THE SAME SHOULD BE QUAS HED AND YOUR APPELLANT BE GIVEN SUCH RELIEF(S) AS PRAYED FOR. 15. THAT THE APPELLANT CRAVES LEAVE TO AMEND, ALTER , MODIFY, SUBSTITUTE, ADD TO, ABRIDGE AND/ OR RESCIND ANY OR ALL OF THE ABOVE GRO UNDS. 5. WE HAVE HEARD THE RIVAL SUBMISSIONS AND PERUSED THE MATERIALS AVAILABLE ON RECORD INCLUDING THE PAPER BOOK OF THE ASSESSEE COMPRISING OF PAGES 1 TO 231. WITH REGARD TO THE ISSUE OF RECEIPT OF SHARE APPLICATION MONEY, WE FIND THAT DURING THE RELEVANT ASSESSMENT YEAR, THE ASSESSEE HAD ALLOTTED 1457400 EQUITY SHARES OF FACE VALUE OF RS 10 EACH AT A PREMIUM OF RS 15 PER SHARE TO 4 PARTIE S VIZ. BABA BASUKI DISTRIBUTORS PVT LTD, REGARDS FIN-CAP PVT LTD , KAMAYANI COMMOTRADE PVT LTD AND AMBER VINIMAY PVT LTD AND ACCORDINGLY RAISED SHARE CAPITAL OF RS 1,45,74,000/ - AND SHARE PREMIUM OF RS 2,18,61,000/-. OUT OF THE TOTAL ALLOTMENT MADE, THE ASSESSEE COMPANY HAD RECEIVED SHARE APPLICATION MONEY OF RS 1,36,65,000/- ONLY DU RING THE RELEVANT FINANCIAL YEAR FROM 3 PARTIES VIZ BABA BASUKI DISTRIBUTORS PVT LTD , REGARDS FIN-CAP PVT LTD AND KAMAYANI COMMOTRADE PVT LTD. SHARE APPLICATION MON EY FROM AMBER VINIMAY PVT LTD WAS RECEIVED DURING THE PRECEDING ASSESSMENT YE AR. THE DETAILS OF AMOUNTS RECEIVED DURING THE YEAR TOGETHER WITH THEIR RESPEC TIVE SOURCES AS EXPLAINED BEFORE THE LD AO AS WELL AS BEFORE THE LD CIT IN SECTION 263 P ROCEEDINGS ARE AS UNDER:- REGARD FIN-CAP PVT LTD RS 62,45,000/- 7 ITA NO.1156/KOL/2017 M/S RBS CREDIT & FINANCIAL DEVELOPMENT PVT. LTD. A.YR.2012-13 7 KAMAYANI COMMOTRADE PVT LTD RS 24,20,000/- BABA BASUKI DISTRIBUTORS PVT LTD - RS 50,00,000/- ------------------------ RS 136,65,000/- REGARD FIN-CAP PVT LTD RS 62,45,000/- A) REFUND OF LOAN FROM CRESCENT TECHNOLOGY PVT LTD RS 15,90,954/- B) SALE OF INVESTMENTS TO NEELIMA KANSAL DHRUV KANS AL AND DSE FINANCIAL SERVICES LTD RS 39,50,380/- C) DIVIDEND RECEIVED FROM SIMPLEX INFRASTRUCTURES L TD RS 2,11,000/- D) REFUND OF MARGIN MONEY FROM BSE/NSE RS 1,96,94 2/- KAMAYANI COMMOTRADE PVT LTD RS 24,20,000/- REFUND OF SHARE APPLICATION MONEY FROM AMBAR VINIMA Y PVT LTD RS 64,20,000/- BABA BASUKI DISTRIBUTORS PVT LTD RS 50,00,000/- REFUND OF SHARE APPLICATION MONEY FROM STARTRADE V YAPAAR LTD RS 50,00,000/- 5.1. THE ABOVE RECEIPTS IN THE RESPECTIVE COMPANIES ACCOUNTS ARE DULY REFLECTED IN THE BANK STATEMENTS OF RESPECTIVE COMPANIES WHICH ARE A LSO ENCLOSED IN THE PAPER BOOK OF THE ASSESSEE. WE ARE IN AGREEMENT WITH THE ARGUM ENTS OF THE LD AR THAT, IN ANY CASE, THE LD AO OUGHT TO HAVE ADDED ONLY A SUM OF RS 1,36 ,65,000/- U/S 68 OF THE ACT BEING THE AMOUNT OF SHARE APPLICATION MONIES RECEIVED DUR ING THE RELEVANT FINANCIAL YEAR AND NOT RS 2,79,00,000/- OR ANY OTHER FIGURE. THIS AR GUMENT WAS MADE BY THE LD AR WITHOUT PREJUDICE TO THE FACT THAT THE ENTIRE SOURC ES TOGETHER WITH THE SOURCE OF SOURCE WERE DULY EXPLAINED BY THE ASSESSEE COMPANY DURING THE COURSE OF ASSESSMENT PROCEEDINGS AS WELL AS BEFORE THE REVISION PROCEEDI NGS U/S 263 OF THE ACT. IT WAS FURTHER PLEADED THAT ASSESSEE BEING A NBFC HAD GENU INE AND SUBSTANTIAL BUSINESS ACTIVITIES DURING THE RELEVANT ASSESSMENT YEAR OF G IVING LOANS AND EARNING INTEREST 8 ITA NO.1156/KOL/2017 M/S RBS CREDIT & FINANCIAL DEVELOPMENT PVT. LTD. A.YR.2012-13 8 INCOME THEREFROM, MAKING INVESTMENT IN SHARES, INCL UDING THAT OF LISTED COMPANIES AND EARNING DIVIDEND THEREFROM AND PROFIT ON SALE OF IN VESTMENTS. THE DETAILS OF INCOME EARNED BY THE ASSESSEE COMPANY ARE AS UNDER:- INTEREST INCOME 3,16,490.00 DIVIDEND RECEIVED 1,21,74,923.63 PROFIT ON SALE OF INVESTMENTS 51,80,564.77 5.2. FROM THE BALANCE SHEET OF THE ASSESSEE ENCLOSE D IN THE PAPER BOOK, WE FIND THAT THE ASSESSEE HAD MADE SUBSTANTIAL INVESTMENTS IN SHARES OF LISTED AND UNLISTED COMPANIES DURING THE YEAR UNDER CONSIDERATION. THE TOTAL VAL UE OF INVESTMENTS AS AT THE BEGINNING OF THE YEAR WERE RS 20,07,47,007.19, OUT OF WHICH I NVESTMENT OF AN AMOUNT OF RS 16,68,79,617/- WAS MADE IN THE SHARES OF A LISTED C OMPANY NAMELY SIMPLEX INFRASTRUCTURE LTD, WHICH IS STATED TO BE ONE OF TH E LARGEST INFRASTRUCTURE COMPANIES IN THE COUNTRY. IT WAS STATED THAT THE ASSESSEE HAD MA DE THIS INVESTMENT IN SIMPLEX INFRASTRUCTURE LTD AT THE RATE OF RS 2 PER SHARE AL THOUGH MARKET VALUE OF SUCH INVESTMENTS ALONE WAS RS 101,68,61,236/-. THE ASSES SEE EXPLAINED BEFORE THE LOWER AUTHORITIES THAT BECAUSE OF HUGE INVESTMENT MADE BY IT IN SIMPLEX INFRASTRUCTURE LTD, THE SHARE APPLICANT COMPANIES HAD INVESTED IN THE A SSESSEE COMPANY. THESE FACTS HAD BEEN CONFIRMED IN THE DEPOSITION OF THE DIRECTORS O F THE SHARE APPLICANT COMPANIES IN RESPONSE TO SUMMONS ISSUED U/S 131 OF THE ACT DURIN G THE COURSE OF ASSESSMENT PROCEEDINGS ITSELF. WE ALSO FIND THAT THE BOOK VAL UE OF SHARES OF THE ASSESSEE COMPANY AS ON 31.3.2011 STOOD AT RS 24.90 PER SHARE , WHICH JUSTIFIES THE ALLOTMENT OF SHARES AT RS 25 PER SHARE INCLUDING PREMIUM OF RS 15 PER SHAR E. THIS GOES TO PROVE THE GENUINENESS OF THE TRANSACTIONS BEYOND DOUBT. THE IDENTITY OF THE SHARE APPLICANTS HAVE BEEN PROVED BEYOND DOUBT BY THOSE SHARE APPLIC ANTS BEING REGULARLY ASSESSED TO INCOME TAX . SIMILARLY THE CREDITWORTHINESS OF THE SHARE APPLICANTS ALSO WERE PROVED BEYOND DOUBT IN THE INSTANT CASE IN AS MUCH AS EVEN THE SOURCE OF SOURCE WAS PROVED 9 ITA NO.1156/KOL/2017 M/S RBS CREDIT & FINANCIAL DEVELOPMENT PVT. LTD. A.YR.2012-13 9 BY THE ASSESSEE. THE ENTIRE DETAILS CALLED FOR BY THE LD AO IN NOTICE U/S 133(6) OF THE ACT WERE DULY FILED BY THE SHARE APPLICANTS BEFORE THE LD AO. THE LD AO EVEN SOUGHT TO VERIFY THE VERACITY OF THEIR CLAIMS BY ISSUING S UMMONS U/S 131 OF THE ACT TO ALL THE SHARE APPLICANTS IN THE ASSESSMENT PROCEEDINGS. AL L THE DIRECTORS OF THE SHARE APPLICANT COMPANIES APPEARED BEFORE THE LD AO AND DEPOSED BEF ORE HIM CONFIRMING THE ENTIRE FACT OF TRANSACTIONS AND INVESTMENT MADE IN THE ASS ESSEE COMPANY TOGETHER WITH SOURCES AND PURPOSE FOR SUCH INVESTMENT. THE LD A R ALSO ARGUED THAT THE ENTIRE SHARE APPLICANT COMPANIES ARE GROUP COMPANIES AND THEY AR E ALL DISCLOSED PROMOTER COMPANIES OF SIMPLEX INFRASTRUCTURE LTD, HAVING COM MON DIRECTORS. 5.3. WE ALSO FIND FROM THE ORDER SHEET COPIES ENCLO SED IN THE PAPER BOOK, THAT THE LD AO HAD SOUGHT FOR SPECIFIC QUERIES REGARDING THE RA ISING OF SHARE CAPITAL IN THE COURSE OF ASSESSMENT PROCEEDINGS AND THE ASSESSEE HAD DISC HARGED ITS OBLIGATION BY PERFORMING THE FOLLOWING FUNCTIONS:- A) DETAILS CALLED FOR BY THE LD AO WERE SUBMITTED T O HIM. B) REPLIES WERE DIRECTLY FILED BY ALL THE SHARE APP LICANTS IN RESPONSE TO NOTICES ISSUED U/S 133(6) OF THE ACT BY FILING THE ITR ACKNOWLEDGE MENTS, AUDITED FINANCIAL STATEMENTS, CONFIRMATION FOR HAVING MADE INVESTMENT IN SHARES OF ASSESSEE COMPANY AT PREMIUM, SOURCE FOR SUCH INVESTMENTS, BANK STATEMEN TS PROVING THE IMMEDIATE SOURCE OF CREDIT, COPY OF SHARE CERTIFICATES CONTAINING DI STINCTIVE NUMBERS OF SHARES, DATE OF ALLOTMENT ETC. C) THE DIRECTORS OF THE SHARE APPLICANT COMPANIES A LSO APPEARED IN PERSON AND GAVE A STATEMENT IN RESPONSE TO SECTION 131 SUMMONS BEFORE THE LD AO AND CONFIRMED THE AFORESAID TRANSACTIONS. D) ASSESSEE HAD ALSO FILED A REPLY LETTER BEFORE TH E LD AO STATING ALL THESE FACTS VIDE LETTER FILED ON 13.3.2015 ENCLOSED IN PAGES 32 & 33 OF THE PAPER BOOK FILED BEFORE US. 10 ITA NO.1156/KOL/2017 M/S RBS CREDIT & FINANCIAL DEVELOPMENT PVT. LTD. A.YR.2012-13 10 HENCE FROM THE AFORESAID ACTION OF THE ASSESSEE COM PANY AND THE RESPONSE OF THE SHARE APPLICANT COMPANIES, IT COULD BE SAFELY CONCLUDED T HAT THE THREE NECESSARY INGREDIENTS FOR SECTION 68 OF THE ACT HAVE BEEN DULY COMPLIED W ITH BY THE ASSESSEE COMPANY AND THERE IS ABSOLUTELY NO CASE FOR MAKING ANY ADDITION U/S 68 OF THE ACT IN THE ASSESSMENT OR WARRANTING ANY FRESH ENQUIRY PURSUANT TO REVISIO N PROCEEDINGS U/S 263 OF THE ACT. WE ARE NOT INCLINED TO ACCEPT THE FINDING OF THE LD CIT IN HIS SECTION 263 ORDER THAT NO ENQUIRIES WERE MADE BY THE LD AO IN THE ASSESSMENT PROCEEDINGS REGARDING SHARE CAPITAL AND SHARE APPLICATION MONEY. INFACT WE ALS O HAD THE BENEFIT OF ASSESSMENT RECORDS WHICH THE LD DR WAS PLEASED TO MAKE AVAILAB LE AT THE TIME OF HEARING BEFORE US. FROM THE PERUSAL OF THE SAID RECORDS, IT WAS NOTICED THAT THE AFORESAID DETAILS AS STATED WERE VERY MUCH AVAILABLE IN THE FILE. 5.4. WE FIND THAT DESPITE FURNISHING OF ALL THE EVI DENCES, THE LD AO PROCEEDED TO ADD TOWARDS RECEIPT OF SHARE CAPITAL BY APPLYING THE PR OVISIONS OF SECTION 68 OF THE ACT TO THE EXTENT OF RS 2.79 CRORES WHICH WAS EVEN HIGHER THAN THE AMOUNT OF RS 1.3665 CRORES RECEIVED BY THE ASSESSEE DURING THE YEAR IN THE ASSESSMENT COMPLETED U/S 143(3) OF THE ACT. HENCE IT COULD BE SAFELY CONCLUDED THAT THE ADDITION MADE IN THE SUM OF RS 2.79 CRORES TOWARDS SHARE CAPITAL (ADDED IN EXCESS BY THE LD AO) COULD ONLY BE TREATED AS AN ACT WHICH IS PREJUDICIAL TO THE INTERESTS OF THE ASSESSEE AND NOT THE REVENUE. HENCE THE CONDITION PRECEDENT FOR INVOKING REVISION ARY JURISDICTION U/S 263 OF THE ACT FAILS SQUARELY ON THAT COUNT. IN OTHER WORDS, EVEN ASSUMING THE ADDITION TOWARDS SHARE CAPITAL IS TO BE MADE U/S 68 OF THE ACT , IT COULD BE MADE ONLY TO THE EXTENT OF RS 1.3665 CRORES BEING THE AMOUNT RECEIVED DURING THE YEAR, WHEREAS THE LD AO HAD ADDED A SUM OF RS 2.79 CRORES. HENCE WHERE IS THE PREJUD ICE CAUSED TO THE REVENUE HERE ? MOREOVER, SINCE ADEQUATE ENQUIRIES WERE MADE BY THE LD AO IN THE COURSE OF ASSESSMENT PROCEEDINGS AND RELEVANT DOCUMENTS WERE DULY FILED BY THE ASSESSEE AS STATED SUPRA, IT COULD BE SAFELY CONCLUDED THAT THE ISSUE HAS BEEN THOROUGHLY EXAMINED 11 ITA NO.1156/KOL/2017 M/S RBS CREDIT & FINANCIAL DEVELOPMENT PVT. LTD. A.YR.2012-13 11 AND ENQUIRED BY THE LD AO. HENCE IT CANNOT BE STAT ED AS LACK OF ENQUIRY ON THE PART OF THE LD AO. 5.5. WE ALSO FIND THAT THE DECISION RENDERED BY THE HONBLE CALCUTTA HIGH COURT IN THE CASE OF RAJMANDIR ESTATES PVT LTD VS PCIT REPORTED IN 70 TAXMANN.COM 124 (CAL) IS NOT APPLICABLE TO THIS CASE AND IS FACTUALLY DISTIN GUISHABLE. IN THE SAID CASE, IT WAS HELD THAT THE LD CIT IS ENTITLED TO REVISE U/S 263 OF THE ACT IF THE LD AO HAD NOT APPLIED HIS MIND TO IMPORTANT ASPECTS AND HAD NOT TAKEN HIS ENQUIRY TO ITS LOGICAL CONCLUSION. HOWEVER, AS FAR AS THE PRESENT CASE OF THE ASSESSEE BEFORE US IS CONCERNED, IT IS WELL ESTABLISHED AS ABOVE AND IS ALSO EVIDENT FROM PERUS AL OF THE IMPUGNED ASSESSMENT ORDER THAT THE LD AO HAD CONDUCTED ENQUIRY INTO THE TAXABILITY OF SHARE CAPITAL RECEIPTS U/S 68 OF THE ACT FROM ALL POSSIBLE PURVIEWS AND HA S EVEN ADDED AN AMOUNT MORE THAN THE AMOUNT RECEIVED BY THE ASSESSEE DURING THE YEAR AND THEREBY CAUSING PREJUDICE ONLY TO THE ASSESSEE AND NOT TO THE REVENUE. HENC E THE RELIANCE PLACED BY THE LD DR ON THE DECISION OF HONBLE CALCUTTA HIGH COURT SUPR A DOES NOT ADVANCE THE CASE OF THE REVENUE BEFORE US. IN THE INSTANT CASE, THE LD A O ON THOROUGH EXAMINATION OF THE RELEVANT RECORDS HAD COME TO A CONCLUSION THAT THE RECEIPTS TOWARDS SHARE CAPITAL DESERVES TO BE ADDED U/S 68 OF THE ACT IN THE SUM O F RS 2.79 CRORES IN THE YEAR UNDER APPEAL , THEREBY TAKING ONE OF THE VIEW IN THE MATT ER. AT THE COST OF REPETITION, IN ANY CASE, ONLY A SUM OF RS 1.3665 CRORES COULD BE ADDED U/S 68 OF THE ACT TOWARDS SHARE CAPITAL AND SHARE APPLICATION MONEY AS THAT WAS THE MONEY RECEIVED DURING THE YEAR UNDER CONSIDERATION, WHERE AS THE LD AO HAD ALREADY ADDED RS 2.79 CRORES IN THE ASSESSMENT, THEREBY CAUSING PREJUDICE ONLY TO THE A SSESSEE AND NOT TO THE REVENUE. WE FIND LOT OF FORCE IN THE ARGUMENTS OF THE LD AR AND ON THE FOLLOWING DECISIONS RELIED UPON BY HIM :- A) HONBLE SUPREME COURT IN THE CASE OF CIT VS MAX INDIA LTD REPORTED IN 295 ITR 282 (SC). 12 ITA NO.1156/KOL/2017 M/S RBS CREDIT & FINANCIAL DEVELOPMENT PVT. LTD. A.YR.2012-13 12 B) HONBLE SUPREME COURT IN THE CASE OF MALABAR IND USTRIAL CO. LTD VS CIT REPORTED IN 243 ITR 83 (SC). C) HONBLE CALCUTTA HIGH COURT IN THE CASE OF CIT V S J.L.MORRISON (INDIA) LTD REPORTED IN 366 ITR 593 (CAL). D) HONBLE DELHI HIGH COURT IN THE CASE OF CIT VS S UNBEAM AUTO LTD REPORTED IN 332 ITR 167 (DEL). E) HONBLE BOMBAY HIGH COURT IN THE CASE OF CIT VS GABRIEL INDIA LTD REPORTED IN 203 ITR 108 (BOM). F) HONBLE PUNJAB & HARYANA HIGH COURT IN THE CASE OF HARI IRON TRADING CO. VS CIT REPORTED IN 263 ITR 437 (P&H). G) HONBLE DELHI HIGH COURT IN THE CASE OF CIT VS L EISURE WEAR EXPORTS PVT LTD REPORTED IN 341 ITR 166 (DEL). 5.6. IN VIEW OF THE AFORESAID FINDINGS AND RESPECTF ULLY FOLLOWING THE VARIOUS JUDICIAL PRECEDENTS RELIED UPON HEREINABOVE, WE HOLD THAT TH E ORDER PASSED BY THE LD AO BY ADDING A SUM OF RS 2.79 CRORES TOWARDS SHARE CAPIT AL CANNOT BE TERMED AS ONE WHICH IS PREJUDICIAL TO THE INTERESTS OF THE REVENUE WARRANT ING REVISIONARY JURISDICTION U/S 263 OF THE ACT IN THE FACTS AND CIRCUMSTANCES OF THE CASE. 6. WITH REGARD TO THE ISSUE OF ALLEGED NOTIONAL LOS S REPRESENTING CHANGES IN INVENTORIES OF SHARES AND SECURITIES, THE LD AR STATED AS UNDER :- THE CLOSING STOCK OF THE ASSESSEE ON 31.3.2012 WAS SHOWN IN NOTE 13 OF THE PROFIT AND LOSS ACCOUNT FOR THE RELEVANT FINANCIAL YEAR UNDER THE HEAD CHANGES IN INVENTORIES OF FINISHED GOODS, WIP AND STOCK IN TRADE AT RS 1,15, 07,191/-. A TABULAR REPRESENTATION OF THE VALUATION OF CLOSING STOCK IS REPRODUCED BEL OW:- 13 ITA NO.1156/KOL/2017 M/S RBS CREDIT & FINANCIAL DEVELOPMENT PVT. LTD. A.YR.2012-13 13 6.1. THE ASSESSEE HAS TAKEN CLOSING STOCK OF THE AF OREMENTIONED SHARE SCRIPS AT LOWER OF COST OR NET REALIZABLE VALUE / MARKET VALUE IN A CCORDANCE WITH THE ACCOUNTING STANDARD 2 (AS 2) ISSUED BY THE INSTITUTE OF CHARTE RED ACCOUNTANTS OF INDIA (IN SHORT ICAI) AND ALSO NOTIFIED BY THE CBDT. IN THE SUPPLEM ENTARY SHOW CAUSE NOTICE DATED 28.2.2017 , THE LD CIT, HAVING OBSERVED THAT THE AS SESSEE HAS VALUED ITS CLOSING STOCK FOR THE RELEVANT ASST YEAR AT LOWER OF COST OR NET REALIZABLE VALUE THUS REFLECTING AN AMOUNT OF RS 1,15,07,191/- IN NOTE 13 OF ITS PROFIT AND LOSS ACCOUNT FOR THE RELEVANT FINANCIAL YEAR INSTEAD OF RS 1,22,37,799/- , ALLEGE D THAT THE SAME REPRESENS MARK TO MARKET (MTM) LOSSES ON ACCOUNT OF REVALUATION OF FO REX DERIVATIVE AND ARE NOTIONAL IN NATURE AND CANNOT BE DEDUCTIBLE AS BUSINESS LOSSES UNDER THE ACT. IN THIS REGARD, THE LD CIT PLACED RELIANCE ON THE CBDTS INSTRUCTION NO. 3 /2010 WHICH RELATES TO TAX IMPLICATIONS OF FORWARD FOREIGN EXCHANGE CONTRACTS. FURTHER IN THE ORDER DATED 8.3.2017 PASSED U/S 263 OF THE ACT, THE LD CIT DISC USSED IN DETAIL WHAT IS MARK TO MARKET LOSS AND HELD THAT SICNE ALL SUCH MTM LOSS ES ON ACCOUNT OF REVALUATION OF FOREX DERIVATIVE ARE ONLY NOTIONAL, THEY ARE NOT DE DUCTIBLE AS BUSINESS LOSSES UNDER THE ACT. IN THIS CONNECTION, THE LD PCIT FURTHER RELIE D ON INSTRUCTION NO. 17/2008 DATED 26.11.2008 OF CBDT RELATING TO NON-ALLOWABILITY OF CONTINGENT AND UNASCERTAINED LOSSES APPLICABLE FOR BANKS. IN VIEW OF THE ABOVE, THE LD PCIT ALLEGED THA THE LD AO HAD FAILED TO MAKE ENQUIRIES WHICH ARE CALLED FOR I N THE CIRCUMSTANCES OF THE CASE THEREBY MAKING THE IMPUGNED ASSESSMENT ORDER PASSED BY HIM ERRONEOUS AND PREJUDICIAL TO THE INTERESTS OF THE REVENUE. 14 ITA NO.1156/KOL/2017 M/S RBS CREDIT & FINANCIAL DEVELOPMENT PVT. LTD. A.YR.2012-13 14 6.2. IN THIS REGARD, THE LD AR SUBMITTED THAT FIRS T OF ALL THAT CLOSING STOCK ENTIRELY CONSISTS OF SHARES AND NO PART OF IT WAS DERIVATIVE S WHERE THE QUESTION OF MTM LOSS WOULD ARISE. AS SUCH, THE ASSESSEE IN ACCORDANCE WI TH AS 2 HAD RIGHTLY VALUED ITS CLOSING STOCK OF SHARES FOR THE RELEVANT ASST YEAR AT LOWER OF COST OR NET REALIZABLE VALUE THUS REFLECTING AN AMOUNT OF RS 1,15,07,191/- IN NOTE 13 OF ITS PROFIT AND LOSS ACCOUNT FOR THE RELEVANT FINANCIAL YEAR. HE ARGUE D THAT AS-2 ISSUED BY ICAI HAD BEEN NOTIFIED BY THE INCOME TAX DEPARTMENT U/S 145(2) OF THE ACT. WE FIND THAT THE ASSESSEE HAVING REFLECTED ITS CLOSING STOCK IN CONF ORMITY WITH AS-2 , THE RESULTANT DIFFERENTIAL FIGURE OF RS 7,30,608/- (1,22,37,799 1,15,07,191) WHICH WAS DEBITED IN THE PROFIT AND LOSS ACCOUNT CANNOT BE REGARDED AS N OTIONAL LOSS. IF THE ASSESSEE WOULD HAVE DEBITED OPENING STOCK AND CREDITED CLOSING STO CK IN THE PROFIT AND LOSS ACCOUNT INSTEAD OF RECOGNIZING IT IN A SEPARATE SCHEDULE UN DER NOTE 13 TO PROFIT AND LOSS ACCOUNT , THE EFFECT WOULD HAVE BEEN THE SAME SINCE CHANGES IN INVENTORIES OF SHARES & SECURITIES IS THE DIFFERENTIAL FIGURE BETWEEN TH E OPENING STOCK AND CLOSING STOCK OF SHARES. THERE THERE WAS NO ERROR IN THE ACCOUNTS OR CLAIM OF LOSS WHICH THE LD AO COULD HAVE DISALLOWED. WE FIND THAT THE LD CIT WRON GLY PRESUMED THE CLAIM OF DIFFERENTIAL FIGURE IN THE VALUATION OF CLOSING STO CK OF SHARES AS MTM LOSS ARISING ON ACCOUNT OF REVALUATION OF FOREX DERIVATIVES. WE FI ND THAT THE ASSESSEE HAD FILED THE DETAILS OF CLOSING STOCK OF SHARES AS TABULATED ABO VE BEFORE THE LD AO WHICH IS ENCLOSED IN PAGE 231 OF THE PAPER BOOK FILED BEFORE US. THE LD AO ON EXAMINING THE SAME RIGHTLY CAME TO THE CONCLUSION THAT NO DISALLO WANCE / ADDITION IS WARRANTED THEREON. ACCORDINGLY THERE WAS NO OCCASION FOR HIM TO DISCUSS ABOUT THE SAME IN THE ASSESSMENT ORDER. MERELY BECAUSE THERE WAS NO MENT ION REGARDING THIS ISSUE IN THE ASSESSMENT ORDER, IT CANNOT BE PRESUMED THAT THE LD AO HAD NOT MADE ANY ENQUIRY IN THIS REGARD IN THE ASSESSMENT PROCEEDINGS. WE HOLD THAT THE LD AO CANNOT BE EXPECTED TO DISCUSS EACH AND EVERY ITEM OF HIS VERIFICATION IN THE ASSESSMENT ORDER AND HE COULD BE EXPECTED TO ADDRESS ONLY THOSE ISSUES ON WHICH H E IS NOT IN AGREEMENT WITH , IN HIS ASSESSMENT ORDER. WE HOLD THAT THE LD AO HAD MADE A DEQUATE ENQUIRIES IN THIS REGARD , 15 ITA NO.1156/KOL/2017 M/S RBS CREDIT & FINANCIAL DEVELOPMENT PVT. LTD. A.YR.2012-13 15 EXAMINED THE SAME IN THE ASSESSMENT PROCEEDING AND HAD TAKEN THE SAME TO ITS LOGICAL CONCLUSION. ON THE CONTRARY, WE ONLY FIND THAT TH E LD CIT HAD WRONGLY PRESUMED THAT THE CHANGES IN THE INVENTORY OF CLOSING STOCK OF SH ARES AS MTM LOSS ARISING ON ACCOUNT OF FOREX DERIVATIVES, WHICH IS ABSOLUTELY BASELESS AND FACTUALLY INCORRECT. THIS PROVES THE COMPLETE NON-APPLICATION OF MIND ON THE PART OF THE LD CIT WHILE INVOKING REVISIONARY JURISDICTION U/S 263 OF THE ACT FOR THI S ISSUE. WE FIND LOT OF FORCE IN THE ARGUMENTS OF THE LD AR AND ON THE FOLLOWING DECISIO NS RELIED UPON BY HIM :- A) HONBLE DELHI HIGH COURT IN THE CASE OF CIT VS A SHISH RAJPAL REPORTED IN 320 ITR 674 (DEL) B) HONBLE DELHI HIGH COURT IN THE CASE OF CIT VS S UNBEAM AUTO LTD REPORTED IN 332 ITR 167 (DEL) C) HONBLE GUJARAT HIGH COURT IN THE CASE OF CIT VS R.K.CONSTRUCTION CO. REPORTED IN 313 ITR 65 (GUJ) D) HONBLE DELHI HIGH COURT IN THE CASE OF DIT VS J YOTI FOUNDATION REPORTED IN 357 ITR 388 (DEL) E) HONBLE DELHI HIGH COURT IN THE CASE OF ITO VS D G HOUSING PROJECTS LTD REPORTED IN 343 ITR 329 (DEL) 6.3. IN VIEW OF THE AFORESAID FINDINGS AND RESPECTF ULLY FOLLOWING THE VARIOUS JUDICIAL PRECEDENTS RELIED UPON HEREINABOVE, WE HOLD THAT TH E ORDER PASSED BY THE LD AO BY ALLOWING THE CHANGES IN INVENTORIES OF FINISHED GOO DS, WIP AND STOCK IN TRADE AS DEDUCTION AND THE SAME CANNOT BE TREATED AS MTM LOS S OR NOTIONAL LOSS AND HENCE CANNOT BE TERMED AS ERRONEOUS IN ASMUCH AS IT IS PR EJUDICIAL TO THE INTERESTS OF THE REVENUE, WARRANTING REVISIONARY JURISDICTION U/S 26 3 OF THE ACT IN THE FACTS AND CIRCUMSTANCES OF THE CASE. 16 ITA NO.1156/KOL/2017 M/S RBS CREDIT & FINANCIAL DEVELOPMENT PVT. LTD. A.YR.2012-13 16 7. IN VIEW OF THE AFORESAID FINDINGS WITH REGARD TO BOTH THE ISSUES OF SHARE CAPITAL AND MTM LOSSES, WE HOLD THAT THE REVISION ORDER PASSED BY THE LD PCIT U/S 263 OF THE ACT DESERVES TO BE QUASHED AND IS HEREBY QUASHED. ACCO RDINGLY , THE GROUNDS RAISED BY THE ASSESSEE ARE ALLOWED. 8. IN THE RESULT, THE APPEAL OF THE ASSESSEE IS ALL OWED. ORDER PRONOUNCED IN THE COURT ON 09.03. 2018 SD/- SD/- [A.T. VARKEY] [ M.BALAGANESH ] JUDICIAL MEMBER ACCOUNTANT MEMBER DATED : 09.03.2018 SB, SR. PS COPY OF THE ORDER FORWARDED TO: 1. M/S RBS CREDIT & FINANCIAL DEVELOPMENT PVT. LTD. , 12/1B, BELLIE SENGUPTA SARANI, KOLKATA-700087. 2. PCIT-3, KOLKATA. 3. C.I.T(A)- , KOLKATA 4. C.I.T.- K OLKATA. 5. CIT(DR), KOLKATA BENCHES, KOLKATA. TRUE COPY BY ORDER SENIOR PRIVAT E SECRETARY HEAD OF OFFICE/D.D.O., ITAT, KOLKATA BENCHE S 17 ITA NO.1156/KOL/2017 M/S RBS CREDIT & FINANCIAL DEVELOPMENT PVT. LTD. A.YR.2012-13 17