Ridhi Sidhi Vincom (P) Ltd, Kolkata V. C.I.T - III,kolkata, Kolkata

ITA 1410/KOL/2013

• Counselvise Citation: [2014] 140 COUNSELVISE.COM (IT) 83156 (ITAT-KOLKATA)
• Duration Of Justice: 1 year(s) 4 month(s) 19 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 10-10-2014
• Appeal Filed By: Assessee
• Bench Allotted: B
• Assessment Year: 2008-2009
• Appeal Filed On: 21-05-2013
• Court: TRIBUNAL
• Department Lawyers: AJAY KUMAR SINGH HEARING CONC
• Keywords: Unexplained cash credit; Business income; Income from undisclosed sources; Opportunity of being heard; Period of limitation; Source of fund; Difference of opinion; Accommodation entries; Assessment record; Capital receipt; Time period of passing order; Reason to believe; Reassessment proceedings
• Section: 143(3); 142(1); 133(6); 147; 68; 148; 263; 63

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL, BENCH B , KOLKATA [BEFORE HONBLE SRI SHAMIM YAHYA, AM & HONBLE SR I GEORGE MATHAN, JM] ITA NO.1410/KOL/2013 ASSESSMENT YEAR : 2008-09 ( APPELLANT ) (RESPONDENT) RIDHI SIDHI VINCOM (.P).LTD. -VS- C.I.T.,- III, K OLKATA KOLKATA KOLKATA (PAN:AADCR 7892 R) FOR THE APPELLANT SHRI SUBASH AGARWAL, ADVOCATE FOR THE RESPONDENT SHRI AJAY KUMAR SINGH,CIT(DR) HEARING CONCLUDED ON : 30.09.2014. DATE OF PRONOUNCEMENT : 10. 10.2014. ORDER PER SHRI GEORGE MATHAN, JM THIS IS AN APPEAL FILED BY THE ASSESSEE AGAINST ORD ER OF LD. C.I.T-KOLKATA-III KOLKATA PASSED U/S 263 OF THE I.T.ACT IN NO.CIT-III /DC(HQ)-3/KOL/263/2012-13/8945 DATED 28/03/2013 FOR ASSESSMENT YEAR 2008-09. 2. SHRI SUBASH AGARWAL, ADVOCATE, REPRESENTED ON B EHALF OF THE ASSESSEE AND SHRI A.K.SINGH, CIT(DR) REPRESENTED ON BEHALF OF THE R EVENUE. 3. IN THE ASSESSEES APPEAL THE ASSESSEE HAS RA ISED THE FOLLOWING GROUNDS OF APPEAL : 1. FOR THAT ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE, THE ORDER PASSED BY THE LD. CIT U/S 263 OF THE ACT IS BAD IN LAW AND IS LIA BLE TO BE QUASHED. 2. FOR THAT ON THE FACTS AND IN THE CIRCUMSTANCES O F THE CASE THE LD. CIT WAS NOT JUSTIFIED IN INITIATING PROCEEDINGS U/S 263. 3. FOR THAT THE LD. CIT ERRED IN EXERCISING THE POW ER OF REVISION FOR THE PURPOSE OF DIRECTING THE A.O. TO HOLD ANOTHER INVESTIGATION WH EN THE ORDER OF THE AO WAS NEITHER ERRONEOUS NOR PREJUDICIAL TO THE INTEREST OF THE RE VENUE. 4. FOR THAT THE LD. CIT WAS NOT JUSTIFIED IN HOLDIN G THAT CREDITWORTHINESS AND IDENTITY OF THE SHAREHOLDERS FROM WHOM SHARE CAPITAL MONEY WAS RECEIVED IN THE INSTANT YEAR REMAINS TO BE VERIFIED THOUGH THE AO COMPLETED THE ASSESSMENT AFTER MAKING PROPER VERIFICATION. 5. FOR THAT IN EXERCISING REVISIONARY POWERS U/S 26 3 THE LD. CIT LOST SIGHT OF THE WELL SETTLED LEGAL POSITION THAT IN THE ASSESSMENT U/S 1 47, THE A.O. IS NOT ENTITLED TO EMBARK ITA.NO.1410/K/2013 RIDHI SIDHI V INCOM(P).LTD. A.YR.2008-09 2 UPON A FISHING EXPEDITION AND TO MAKE ROVING ENQUIR IES AS SUCH, ASSUMING BUT NOT ADMITTING THAT PROPER ENQUIRIES WERE NOT DONE IN RE SPECT OF THE SHARE CAPITAL RAISED BY THE ASSESSEE, THERE WAS NO ERROR IN THE ORDER PASSE D BY THE A.O. 6. FOR THAT THE LD. CIT EXCEEDED HIS JURISDICTION B Y DIRECTING THE LD. A.O. AS TO HOW THE FRESH ASSESSMENT SHOULD BE FRAMED BY HIM. 7. THAT THE APPELLANT CRAVES LEAVE TO ADD, ALTER OR DELETE ALL OR ANY OF THE GROUNDS OF APPEAL. 4. THE ASSESSEE HAS ALSO RAISED ONE ADDITIONAL GROU ND WHEREIN THE ASSESSEE HAS CHALLENGED THE ORDER PASSED U/S 263 OF THE ACT AS B ARRED BY LIMITATION. 5. THE ASSESSEE HAS MADE AN APPLICATION FOR ADMISSI ON OF THE ADDITIONAL GROUND. THOUGH THE REVENUE HAS RAISED OBJECTIONS AGAINST TH E ADMISSION OF THE ADDITIONAL GROUND AS IT IS NOTICED THAT THE GROUND RAISED BY T HE ASSESSEE GOES TO THE ROOT OF THE ORDER PASSED U/S 263, IN VIEW OF THE DECISION OF TH E HONBLE SUPREME COURT IN THE CASE OF NATIONAL THERMAL POWER CORPORATION REPORTED IN 2 29 ITR 386 (SC) AS THE GROUND RAISED IS PURELY LEGAL IN ISSUE AND DOES NOT REQUIR E ANY VERIFICATION OF FACTS, THE SAME IS ADMITTED AND ADJUDICATED. 6. THE LD. AR SUBMITTED THAT FOR A.YR.2008-09 THE A SSESSEE HAD FILED ITS RETURN OF INCOME ON 30.03.2009 AND ASSESSMENT WAS PASSED U/S 147 R.W.S. 143(3) OF THE ACT ON 24.11.2010. IT WAS THE SUBMISSION THAT THIS ORDER P ASSED U/S 147 R.W.S. 143(3) OF THE ACT ON 24.11.2010 WAS FOUND TO BE ERRONEOUS AND PRE JUDICIAL TO THE INTEREST OF THE REVENUE AND CONSEQUENTLY THE POWERS OF SECTION 263 WAS INVOKED BY THE LD. CIT BY ISSUING A SHOW CAUSE NOTICE ON 18.03.2013 TO WHICH THE ASSESSEE HAD FILED ITS REPLY ON 25.03.2013. IT WAS THE SUBMISSION THAT THE SUBMISSI ONS MADE BY THE ASSESSEE WERE NOT ACCEPTED AND THE ORDER U/S 263 OF THE ACT WAS PASSE D ON 28.03.2013. IT WAS THE SUBMISSION THAT THE APPEAL HAS BEEN FILED BY THE AS SESSEE AGAINST THIS ORDER PASSED U/S 263 ON 28.03.2013. THE LD. AR ON BEHALF OF THE ASSE SSEE DREW OUR ATTENTION TO THE PAPER BOOK FILED BY THE ASSESSEE CONTAINING 63 PAGE S. THE LD. AR SUBMITTED THAT THE WRITTEN SUBMISSION ON BEHALF OF THE ASSESSEE WAS AT PAGES 4 TO 21 OF THE PAPER BOOK WHICH IS EXTRACTED AS UNDER :- THE ASSESSEE COMPANY FILED ITS RETURN ON 30.09.2008 FOR THE A.Y.: 2008 -2009 SHOWING A TOTAL INCOME OF RS. 1,170/-. SUBSEQUENTLY, THE CASE WAS REOPENED BY THE LD. A.O. ON THE ITA.NO.1410/K/2013 RIDHI SIDHI V INCOM(P).LTD. A.YR.2008-09 3 GROUND THAT ASSESSEE RECEIVED COMMISSION INCOME AMO UNTING TO RS.21,000/- WHICH WAS NOT DISCLOSED IN THE RETURN OF INCOME. ACCORDINGLY, NOTICE U/S. 148 WAS ISSUED AND FINALLY REASSESSMENT WAS COMPLETED U/S. 143(3)/147 ON 24.11.2010 BY ASSESSING THE TOTAL INCOME AT RS.22,170/-. THEN REVISION PROCEEDING U/S . 263 WERE INITIATED AGAINST THE ASSESSEE COMPANY AND FINALLY A REVISION ORDER U/S. 263 WAS PASSED BY THE HONBLE CIT, KOLKATA -III SETTING ASIDE THE ORDER U/S. 143(3) / 147 DIRECTING THE LD. A.O. TO COMPLETE THE ASSESSMENT AFRESH. BEING AGGRIEVED WITH THE ORD ER OF LD. CIT, THE ASSESSEE-COMPANY FILED AN APPEAL BEFORE THE HONBLE TRIBUNAL. 2. GROUNDS OF APPEAL IN THE MEMORANDUM OF APPEAL, FOLLOWING GROUNDS HAVE RAISED BY THE ASSESSEE-COMPANY 1. FOR THAT ON THE FACTS AND IN THE CIRCUMSTANCES O F THE CASE, THE ORDER PASSED BY THE LD. CIT U/S 263 OF THE CT IS BAD IN LAW AND IS LIABLE TO BE QUASHED. 2. FOR THAT ON THE FACTS AND IN THE CIRCUMSTANCES O F THE CASE THE LD. CIT WAS NOT JUSTIFED IN INITIATING PROCEEDINGS U/S 263. 3. FOR THAT THE LD. CIT ERRED IN EXERCISING THE POW ER OF REVISION FOR THE PURPOSE OF DIRECTING THE A. O. TO HOLD ANOTHER INVESTIGATION W HEN THE ORDER OF THE A. O. WAS NEITHER ERRONEOUS NOR PREJUDICIAL TO THE INTEREST OF THE RE VENUE. 4. FOR THAT THE LD. CIT WAS NOT JUSTIFED IN HOLDIN G THAT CREDITWORTHINESS AND IDENTITY OF THE SHAREHOLDERS FROM WHOM SHARE CAPITAL MONEY WAS RECEIVED IN THE INSTANT YEAR REMAINS TO BE VERIFED THOUGH THE . O. COMPLETED T HE ASSESSMENT AFTER MAKING PROPER VERIFCATION. 5. FOR THAT IN EXERCISING REVISIONARY POWERS U/S 26 3 THE LD. CIT LOST SIGHT OF THE WELL SETTLED LEGAL POSITION THAT IN THE ASSESSMENT U/S 1 47, THE A. O. IS NOT ENTITLED TO EMBARK UPON A FISHING EXPEDITION AND TO MAKE ROVING ENQUIR IES AS SUCH, ASSUMING BUT NOT ADMITTING THAT PROPER ENQUIRIES WERE NOT DONE IN RE SPECT OF THE SHARE CAPITAL RAISED BY THE ASSESSEE, THERE WAS NO ERROR IN THE ORDER PASSE D BY THE . O. 6. FOR THAT THE LD CIT EXCEEDED HIS JURISDICTION BY DIRECTING THE LD. . O. AS TO HOW THE FRESH ASSESSMENT SHOULD BE FRAMED BY HIM. 3. ADDITIONAL GROUND OF APPEAL: AT THE OUTSET, THE APPELLANT CRAVES LEAVE TO RAISE THE FOLLOWING ADDITIONAL GROUNDS OF APPEAL WHICH ARE MAINLY LEGAL IN NATURE AND WERE IN ADVERTENTLY MISSED OUT FROM THE MEMORANDUM OF APPEAL FILED FOR THAT THE ORDER PASSED U/S 263 BY THE LD. CIT IS BARRED BY LIMITATION, AS SUCH, THE ORDER PASSED U/S 263 IS LIABLE TO BE QUASHED. COPY OF A PETITION PRAYING FOR ADMISSION OF ADDITIO NAL GROUNDS OF APPEAL ALONG WITH ADDITION GROUND IS ANNEXED IN THE PAPER BOOK. ITA.NO.1410/K/2013 RIDHI SIDHI V INCOM(P).LTD. A.YR.2008-09 4 3.1. MY HUMBLE SUBMISSIONS IN RESPECT OF ADDITIONAL GROUND OF APPEAL ARE BEING MADE HERE UNDER (A) IT IS HUMBLY SUBMITTED THAT THE NSTANT REVISIONAR Y ORDER PASSED BY THE LD. CIT U/S. 263 IS BAD IN !AW FROM THE POINT OF VIEW OF LIMITATION PROVIDED IN SEC. 263(2). ACCORDING TO SEC. 263 (2), NO ORDER OF REVISION SHA LL BE MADE AFTER THE EXPIRY OF TWO YEARS FROM THE END OF THE F.Y. IN WHICH THE ORDER S OUGHT TO BE REVISED WAS PASSED. (B) IN THE INSTANT CASE, THE PROCESSING OF RETURN / SU MMARY ASSESSMENT FOR THE YEAR IN QUESTION WAS MADE ON 21.12.2009 I.E., F.Y. 2009-10 (PAGE 1 OF THE A.O.S ORDER). THE RE- ASSESSMENT WAS MADE FOR THE SPECIFIC PURPOSE OF TAX ING THE ASSESSEE FOR NON-DISCLOSURE OF COMMISSION INCOME (AS CAN BE SEEN FROM THE REASO NS RECORDED PLACED IN THE PAPER BOOK). THE RAISING OF SHARE CAPITAL WAS NOT THE ISS UE OF RE- OPENNG. THEREFORE, THE ORDER SOUGHT TO BE REVISED WAS THE SUMMARY ASSESSMENT / P ROCESSING DONE U/S. 143(1). THUS, PERIOD OF LIMITATION PRESCRIBED FOR PASSING THE ORD ER U/S. 263 EXPIRED ON 31.03.2012. BUT THE ORDER U/S. 263 WAS PASSED ON 28.03.2013. (C) THE ISSUE IS DIRECTLY COVERED BY THE HONBLE SUPRE ME COURTS JUDGEMENT N THE CASE OF C1T VS. ALAGENDRAN FINANCE LTD. 293 ITR 1 WHERE IT WAS HELD THAT WHERE CIT IN EXERCISING ITS REVISIONAL JURISDICTION RE-OPENED OR DER OF ASSESSMENT IN RELATION TO A PARTICULAR ISSUE, WHICH WAS NOT THE SUBJECT OF RE-A SSESSMENT PROCEEDINGS, PERIOD OF LIMITATION PROVIDED FOR IN SEC. 263(2) WOULD BEGIN TO RUN FROM THE DATE OF ORDER OF ORIGINAL ASSESSMENT AND NOT FROM THE ORDER OF REASS ESSMENT. (D) IT IS PERTINENT TO NOTE HERE THAT IN THE FOLLOWING CASES, IT WAS HELD THAT SUMMARY ASSESSMENT MADE U/S. 143(1) CAN BE REVISED U/S. 263 (I) CIT VS. SRI MAHASASTHA PICTURES 263 ITR 304 (MA D) (II) CIT VS. CHIDAMBARAM CONSTRUCTION CO. 261 ITR 7 54 (MAD) (III) CIT VS. ANDERSON MARINE AND SONS PVT LTD. 266 ITR 694 (BOM.) (E) THE HONBLE CO-ORDINATE BENCH OF ITAT, KOLKATA IN THE CASE OF M/S. USHA MARTIN VENTURES LTD. VS. CIT, ITA NO. 576/K/2009 , ORDER DATED 30.09.2009 FOLLOWING THE JUDGEMENT OF ALAGENDRAN FINANCE (SUPRA) ALLOWED THE APPEAL OF THE ASSESSEE AND QUASHED THE ORDER PASSED U/S. 263 IN THE SIMILAR SI TUATION AND IN A CASE WHERE THE ROI WAS PROCESSED U/S 143(1). COPY OF THE SAID ORDER IS ANNEXED HEREWITH AND MARKED AS ANNEXURE: A . 3. GROUND NO. 1, 2 & 3 IN THESE GROUNDS, THE ASSESSEE HAS CHALLENGED THE V ALIDITY OF REVISION PROCEEDINGS U/S. 263. IN THIS REGARD, SUBMISSIONS ARE BEING MADE HER EUNDER (A ) THE VARIOUS GROUNDS ON WHICH THE LD. CIT HAS HELD THE ORDER OF THE A.O. TO BE ERRONEOUS AS WELL AS PREJUDICIAL TO THE INTEREST OF THE REVENUE ARE DISCUSSED HEREUNDER ONE BY ONE (I) NOTICES U/S. 133(6) HAVE BEEN SENT ON A TEST CHECK BASIS ITA.NO.1410/K/2013 RIDHI SIDHI V INCOM(P).LTD. A.YR.2008-09 5 OUR SUBMISSIONS ASSESSMENT PROCEEDINGS ARE INQUIRY BASED PROCEEDING S. BUT IT IS NOT POSSIBLE FOR THE A.O. TO MAKE 100% ENQUIRIES IN RESPECT OF ALL THE A SPECTS. THERE IS SOME ELEMENT OF RANDOMNESS IN CONDUCTING THE ASSESSMENT PROCEEDINGS . IT IS AN ABSURDITY TO SAY THAT 100% OF EVERY TRANSACTION BE EXAININED BY THE A.O. (II) IT IS SEEN THAT THE BANK STATEMENTS OF THE SUBSCRIB ING COMPANIES IS FOR A LIMITED PERIOD AND NOT FOR THE WHOLE YEAR. ANALYSIS OF THIS STATEMENT DOES NOT THROW ANY LIGHT WHATSOEVER ON THE SOURCE OF THE FUNDS OF THE SUBSCR IBER COMPANIES. THE A.O SHOULD HAVE CALLED FOR THE BANK STATEMENT OF THE FULL FINANCIAL YEAR FOR PROPER ANALYSIS & VERIFCATION. OUR SUBMISSIONS IN THIS REGARD IT IS HUMBLY SUBMITTED THAT AT THE T IME OF REASSESSMENT PROCEEDINGS, THE A.O. ISSUED 133(6) NOTICES TO THE SHARE APPLICANTS TO CONFIRM THE TRANSACTIONS WITH THE ASSESSEE- COMPANY ALONGWITH DOCUMENTARY EVIDENCES. REPLIES ACCORDINGLY WERE MADE BY THE SHARE- APPLICANTS BY FILING RELEVANT PAGES O F BANK STATEMENTS AND OTHER DOCUMENTARY EVIDENCES. THERE IS NO REQUIREMENT TO F ILE THE COMPLETE BANK STATEMENT BY THE SHARE APPLICANTS IN RESPONSE TO NOTICE U/S. 133 (6). (III) THE REPLIES WERE JUST PLACED ON RECORD AND NO INDEP ENDENT INQUIRIES WERE CARRIED OUT REGARDING THE FACT WHETHER THE SUBSCRIBING COMP ANIES WERE AVAILABLE AT THE GIVEN ADDRESS, WHETHER THEY HAD THE FINANCIAL CAPABILITY TO INVEST SUCH SUBSTANTIAL AMOUNTS AND WHETHER THEY WERE GENUINE CORPORATE ENTITIES. OUR SUBMISSIONS ADMITTEDLY, THE SHARE SUBSCRIBERS HAD SUBMITTED THE PRIMARY DOCUMENTS IN THE OFFICE OF THE A.O. PURSUANT TO NOTICES ISSUED ON THEM U/S 133 (6). THUS, INDEPENDENT ENQUIRIES WERE CONDUCTED AND THE ASSESSMENT WAS FRAMED BASED THEREON. IT CAN BE SEEN FROM THE REPLIES RECEIVED THAT DOCUMENTS PERTAINING TO THE S OURCE OF INVESTMENT, BANK STATEMENTS, ITR ACKNOWLEDGEMENTS AND FINAL ACCOUNTS WERE SUBMIT TED BY THEM. EVEN LD. CIT HAS FAILED TO POINT OUT ANY DEFECT / IRREGULARITY IN TH E DOCUMENTS ON RECORD. THE ACTUAL EXISTENCE OF THE COMPANY IS NOT IN DISPU TE. THE SAME IS REGISTERED WITH ROC. RETURNS OF INCOME CANNOT BE FILED WITHOUT OBTAINING PAN NOS. PAN NOS. ARE NOT ALLOTTED UNLESS THE DEPARTMENT IS SATISFIED ABOUT T HE EXISTENCE AND THE IDENTITY OF THE APPLICANT. (IV) THE A. O. DID NOT EXAMINE A SINGLE DIRECTOR OF THE ASSESSEE COMPANY OR OF THE SUBSCRIBING OMPANIES. OUR SUBMISSIONS THERE IS NO REQUIREMENT OF LAW TO EXAMINE THE DIREC TORS OF THE ASSESSEE COMPANY AS WELL AS THE SUBSCRIBING COMPANIES U/S 131. ITA.NO.1410/K/2013 RIDHI SIDHI V INCOM(P).LTD. A.YR.2008-09 6 (V) IT HAS BECOME A COMMON PRACTICE TO INTRODUCE UNACCO UNTED MONEY BY WAY OF SHARE CAPITAL IN DUMMY COMPANIES. THE PRESENT ASSESSEE CO MPANY IS PART OF THE LARGE NUMBER OF SUCH CASES IN KOLKATA AS WELL AS OTHER PARTS OF THE COUNTRY. OUR SUBMISSIONS THERE IS NO MATERIAL TO COME TO THIS CONCLUSION. LD . CIT HAS ALSO NOT REFERRED TO ANY MATERIAL TO COME TO SUCH CONCLUSION. THE AVERMENT I N THE ORDER HAS BEEN MADE ON THE BASIS OF CONJECTURES AND SURMISES AND WITHOUT ANY M ATERIAL BASIS. (VI) INTRODUCTION OF UNACCOUNTED MONEY AS SHARE CAPITAL IS THAT UNACCOUNTED CASH IS DEPOSITED IN THE BANK ACCOUNTS OF DIFFERENT PERSONS /COMPANIES. AFTER THIS, THE MONEY IS TRANSFERRED BY WAY OF CHEQUES TO OTHER COMPANIES AN D THIS IS DONE 3 TO 4 TIMES USING DIFFERENT COMPANIES AND THUS ROTATING THE MONEY INT O 3 TO 4 LAYERS. OUR SUBMISSIONS THERE IS NO MATERIAL TO COME TO THIS CONCLUSION. LD . CIT HAS ALSO NOT REFERRED TO ANY MATERIAL TO COME TO SUCH CONCLUSION IN THE INSTANT ASSESSEES CASE. THE AVERMENT IN THE ORDER HAS BEEN MADE ON THE BASIS OF CONJECTURES AND SURMISES AND WITHOUT ANY MATERIAL BASIS. (VII) THE COMPANY IS THEN PASSED ON TO THE FINAL PURCHASE R AFTER CHARGING A PERCENTAGE OF THE CAPITAL IN THE COMPANY. THIS MODUS OPERANDI HAS BEEN CONFIRMED IN MANY SEARCH OPERATIONS CARRIED OUT BY THE INVESTIGATION WING ON ENTRY OPERATORS & OTHERS OVER THE PAST FEW YEARS. OUR SUBMISSIONS LD. CIT HAS ALSO NOT REFERRED TO ANY MATERIAL ON RE CORD TO COME TO SUCH CONCLUSION IN THE INSTANT ASSESSEES CASE. THE AVERMENT IN THE ORD ER HAS BEEN MADE ON THE BASIS OF CONJECTURES AND SURMISES AND WITHOUT ANY MATERIAL B ASIS. IT IS FURTHER SUBMITTED THAT IN THE INSTANT CASE, AS STATED ABOVE, THE A.O. AFTER M AKING PROPER INQUIRIES IN RESPECT OF SHARE CAPITAL COMPLETED THE RE-ASSESSMENT PROCEEDIN GS BY TREATING THE SHARE CAPITAL AS GENUINE. NO MATERIAL IS BROUGHT ON RECORD BY THE LD . CIT THAT THE DOCUMENTS ON RECORD ARE NOT GENUINE EVEN THOUGH THE DOCUMENTS IN QUESTI ON RELATED TO THE INCOME TAX DEPARTMENT LIKE INCOME TAX RETURNS OF THE SHARE SUB SCRIBERS. AS PER THE JUDGEMENT OF THE HONBLE SUPREME COURT I N THE CASE OF LOVELY EXPORTS 216 CTR 195, WHICH RELATED TO THE ISSUE OF ADDITION OF SHARE CA PITAL U/S 68, IT WAS HELD THAT ADDITION ON ACCOUNT OF SHARE CAPITAL CANNOT BE MAD E IN THE HANDS OF THE RECIPIENT COMPANY. (VIII) ATTENTION IS ALSO INVITED TO THE DELHI HIGH COURT I N THE CASE OF CIT VS- NOVA PROMOTERS & FINANCE PVT. LTD. [342 ITR 0169] WHERE IT WAS OBSERVED TKAT THE FACT THAT THE SHARE APPLICATION MONEY HAD COME THROUGH CHEQUE S AND THE FACT THAT THE SHARE APPLICANTS WERE REGISTERED WITH THE REGISTRAR OF CO MPANIES WERE NEUTRAL FACTS AND DID INTO HAVE MUCH EVIDENTIARY VALUE. OUR SUBMISSIONS ITA.NO.1410/K/2013 RIDHI SIDHI V INCOM(P).LTD. A.YR.2008-09 7 IT IS HUMBLY SUBMITTED THAT IN THE INSTANT CASE THE LD. CIT HAS NOT REFERRED TO ANY MATERIAL ON RECORD TO COME TO SUCH CONCLUSION THAT THE ASSESSEE WISHED TO CONVERT ITS UNACCOUNTED MONEY IN THE FORM OF SHARE CAPITAL. IT IS PERTINENT TO NOTE HERE THAT FROM THE RECORDS IT CAN BE SEEN THAT THE INSTANT YEAR IS THE FIRST YEAR OF THE ASSESSEE- COMPANY AND THAT THE COMPANY HAS NOT ITS BUSINESS OPERATIONS. A S SUCH, NO QUESTION OF ARISAL OF SUCH A HUGE AMOUNT OF UNACCOUNTED MONEY ARISES. IN THE CAS E CIT VS. BHARAT ENGINEERING & CONSTRUCTION CO. LTD. 83 ITR 187, HONBLE SUPREME COURT HAS HELD THAT WHERE CASH CREDITS ARE FOUND IMMEDIATELY AFTER THE ASSESSEE CO MMENCED ITS ACTIVITIES, THEY COULD NOT REPRESENT THE INCOME / PROFIT OF THE ASSESSEE AND I T COULD BE REASONABLY ASSUMED THAT THE ENTRIES ARE CAPITAL RECEIPTS. IT IS FURTHER SUBMITT ED THAT THE CASE OF NOVA PROMOTERS AS RELIED ON BY THE LD. CIT, THE CASE IS NOT RELATING TO THE SEC. 263 PROCEEDINGS. FURTHER, IN THE SAID CASE, A LETTER WAS RECEIVED BY THE A.O. FR OM THE DIRECTOR OF INCOME TAX (INVESTIGATION) INFORMING THAT THERE WERE 16 ENTRY OPERATORS WHO HAD GIVEN ACCOMMODATION ENTRIES TO SEVERAL PERSONS OF WHICH T HE ASSESSEE WAS ALSO ONE. THIS FACT WAS ALSO CONFIRMED BY THE SAID PERSONS. HOWEVER, IN THE INSTANT CASE, THE LD. CIT DID NOT BRING ANY MATERIAL ON RECORD TO PROVE THE SHARE CAPITAL RAISED BY THE ASSESSEE WAS INGENUINE. THEREFORE, THE RATIO OF NOVA PROMOTERS I S NOT APPLICABLE TO THE INSTANT CASE. (D) IT IS HUMBLY SUBMITTED BEFORE YOUR HONOURS THAT THE PROVISION U/SEC 263 DEALS WITH THE REVISIONARY POWERS OF THE CIT WHICH ARE SUPERVI SORY IN NATURE. SEC 263: REVISION BY THE COMMISSIONER (1) THE COMMISSIONER MAY CALL FOR AND EXAMINE THE RECOR D OF ANY PROCEEDING UNDER THIS ACT, AND IF HE CONSIDERS THAT ANY ORDER PASSED THER EIN BY THE AO IS ERRONEOUS IN SO FAR AS IT IS PREJUDICIAL TO THE INTERESTS OF THE REVENU E, HE MAY, AFTER GIVING THE ASSESSEE AN OPPORTUNITY OF BEING HEARD AND AFLER MAKING OR CAUS ING TO BE MADE SUCH ENQUIRY AS HE DEEMS NECESSARY, PASS SUCH ORDER THEREON AS THE CIR CUMSTANCES OF THE CASE JUSTIFY, INCLUDING AN ORDER ENHANCING OR MODIFYING THE ASSES SMENT, OR CANCELLING THE ASSESSMENT AND DIRECTING A FRESH ASSESSMENT. A. MEANING OF THE WORD ERRONEOUS AND PREJUDIC IAL TO THE INTEREST OF THE REVENUE IT IS SUBMITTED THAT THE DELHI HC IN CIT V. SHRI AS HISH RAJPAL 320 ITR 674, THE WORD ERRONEOUS AND PREJUDICIAL TO THE INTEREST OF THE REVENUE HAS BEEN EXPLAINED AS FOLLOWS, AN ORDER IS ERRONEOUS WHEN IT IS CONTRARY TO THE L AW OR PROCEEDS ON AN INCORRECT ASSUMPTION OF FACTS OR IN BREACH OF PRINCIPLES OF N ATURAL JUSTICE OR IS PASSED WITHOUT APPLICATION OF MIND, THAT IS STEREO-TYPED, IN AS MU CH AS, THE AO, ACCEPTS WHAT IS STATED IN THE RETURN OF THE ASSESSEE WITHOUT MAKING ANY EN QUIRY CALLED FOR IN THE CIRCUMSTANCES OF THE CASE, THAT IS PROCEEDS WITH UNDUE HASTE. THE EXPRESSION PREJUDICIAL TO THE INTEREST OF THE REVENUE WHILE NOT TO BE CONFUSED WITH THE L OSS OF TAX WILL CERTAINLY INCLUDE AN ERRONEOUS ORDER WHICH RESULTS IN A PERSON NOT PAYIN G TAX WHICH IS LAWFULLY PAYABLE TO THE REVENUE. B. BOTH CONDITIONS NEED TO BE SATISFIED IN ORDER TO EXERCISE POWERS U/SEC 26 3 . ITA.NO.1410/K/2013 RIDHI SIDHI V INCOM(P).LTD. A.YR.2008-09 8 IT IS HUMBLY SUBMITTED THAT PRE-REQUISITE FOR EXERC ISE OF SUOMOTU REVISIONAL JURISDICTION BY THE COMMISSIONER U/SEC 263 OF THE ACT IS THAT, T HE ORDER OF THE ITO IS ERRONEOUS IN SO FAR AS IT IS PRE-JUDICIAL TO THE INTEREST OF THE REVENUE AND ONLY IF THE SAID TWIN CONDITIONS ARE FULFILLED, THEN ONLY THE REVISIONAL ORDER IS JUSTIFIED. IN THE PRESENT MATTER, THE AO HAS CONDUCTED DEEP INQUIRY AND THEREFORE THE ORDER IS NEITHER ERRONEOUS NOR PREJUDICIAL. C. REVISIONAL POWERS CANNOT BE EXERCISED ON THE GRO UND THAT THE AO SHOULD HAVE GONE DEEPER INTO THE MATTER OR SHOULD HAVE MADE A M ORE ELABORATE DISCUSSION. (I) THE COURT OBSERVED IN THE CASE OF CIT V. LEISURE WEAR EXPORTS LTD. 341 ITR 166 (DEL) THAT WHERE THE ASSESSMENT ORDER HAS BEEN PASSED BY THE A O AFTER TAKING INTO ACCOUNT ASSESSEES SUBMISSIONS AND DOCUMENTS FURNISHED BY H IM, AND NO MATERIAL IS BROUGHT ON RECORD BY THE CIT WHICH SHOWS THAT THERE WAS ANY DI SCREPANCY OR FALSITY IN THE EVIDENCE FURNISHED BY THE ASSESSEE, THE ORDER OF THE AO CANN OT BE SET ASIDE FOR MAKING DEEP ENQUIRY ONLY ON THE PRESUMPTION THAT SOMETHING NEW MAY COME OUT. (II) THE COURT IN CIT V. BUDHILAL HIRALAL RANA 125 TAXMAN 455 (GUJ. ) HELD THAT WHEN THERE WAS NO MATERIAL BROUGHT ON RECORD TO JUS TIFY THAT THERE WAS AN ERROR OR OMISSION OR FAILURE ON THE PART OF AO SO AS TO MAKE AN ORDER ERRONEOUS, THEN THE ORDER PASSED BY THE COMMISSIONER, INVOKING SEC. 263 TO SE T ASIDE ORDER OF THE AO WAS NOT VALID IN LAW. IT IS STATED IN THE INSTANT MATTER, THERE IS NO MAT ERIAL BROUGHT ON RECORD BY THE CIT TO PROVE HOW THE ORDER OF THE AO IS ERRONEOUS IN SO FA R AS IT IS PREJUDICIAL TO THE REVENUE AND THE CIT HAS PASSED THE ORDER ULSEC 263 WITHOUT ANY BASE OR FOUNDATION AND AT ITS OWN WHIMS AND CAPRICE AND THEREFORE THE SAME IS DEV OID OF ANY MERIT AND SHOULD BE DISMISSED IN TOTO. D. THERE IS A DIFFERENCE BETWEEN ACK OF ENGUIRY A ND INADEGUATE INGUIRY. (I) IT IS TO BE NOTED IF THERE WAS INQUIRY, EVEN I NADEQUATE, THAT WOULD NOT BY ITSELF GIVE OCCASION TO THE COMMISSIONER TO PASS ORDER U/S EC 263 OF THE ACT MERELY BECAUSE HE HAS A DIFFERENCE OF OPINION IN THE MATTER. IT IS ON LY THE CASES OF LACK OF INQUIRY THAT SUCH A COURSE OF ACTION WOULD BE OPEN. IN THE INSTANT CASE, IT CAN BE SEEN FROM THE PAPER- BOOK THAT THE A.O HAS, IN THE NOTICE ISSUED U/S 142(1), REQUISITIONED VARIOUS DETAILS PE RTAINING TO THE SHARE CAPITAL. ADMITTEDLY, IN THE INSTANT CASE NOTICES U/S 133(6) WERE SERVED ON THE SHARE SUBSCRIBERS. THIS ITSELF SHOWS THAT THE A.O HAS APPLIED HIS MIND TO THE ISSUE AND MADE PROPER INQUIRIES. (II) THE COURT OBSERVED IN DIT V. JYOTI FOUNDATION 357 ITR 388 (DEL.), ... THAT ORDERS WHICH ARE PASSED WITHOUT INQUIRY OR INVESTIGATION A RE TREATED AS ERRONEOUS AND PREJUDICIAL TO THE INTERESTS OF THE REVENUE, BUT OR DERS WHICH ARE PASSED AFTER INQUIRY OR INVESTIGATION ON QUESTION OR ISSUE ARE NOT PER SE O R NORMALLY TREATED AS ERRONEOUS AND ITA.NO.1410/K/2013 RIDHI SIDHI V INCOM(P).LTD. A.YR.2008-09 9 PREJUDICIAL TO THE INTERESTS OF REVENUE BECAUSE REV ISIONARY AUTHORITY FEELS AND OPINES THAT FURTHER INQUIRY OR INVESTIGATION WAS REQUIRED OR DEEPER OR FURTHER SCRUTINY SHOULD BE UNDERTAKEN. THEREFORE, WHERE REVISIONARY AUTHORI TY OPINED THAT FURTHER INQUIRY WAS REQUIRED, SUCH INQUIRY SHOULD HAVE BEEN CONDUCTED B Y REVERSIONARY AUTHORILY HIMSELF TO RECORD FINDING THAT ASSESSMENT ORDER PASSED BY THE O WAS ERRONEOUS AND PREJUDICIAL TO REVENUE. (III) THE DELHI HIGH COURT IN THE CASE OF CIT V. SUNBEAM AUTO LTD. 332 ITR L67 AND CIT V. ANIL KUMAR SHARMA 335 ITR 83 HELD THAT THE FACT AS TO WHETHER THE AO HAS APPLIED HIS MIND OR NOT NEED NOT NECESSARLY BE DET ERMINED FROM WHAT HAS BEEN STATED IN THE ASSESSMENT ORDER ALONE, IT HAS TO BE EXAMINED A S TO WHETHER ANY INQUIRY WAS AT AIL CONDUCTED BY THE AO. THERE EXISTS A DIFFERENCE BETW EEN LACK OF INQUIRY AND INADEQUATE INQUIRY. IF THERE WERE ANY INQUIRY, EVEN INADEQUATE THAT WOU LD NOT GIVE AN OCCASION TO EXERCISE JURISDICTION U/SEC 263 OF THE SAID ACT. (F) IT IS SUBMITTED THAT THE AO EXAMINED ALI THE RE LEVANT DOCUMENTS AND HAD CONDUCTED A PROPER INQUIRY. IT IS PERTINENT TO NOTE THAT THE LD . COMMISSIONER DID NOT HIMSELF CONDUCT ANY INQUIRY TO SEE HOW THE AOS ORDER WAS ERRONEOUS OR PREJUDICIAL, WHICH HE WAS DUTY BOUND TO CONDUCT. THUS, THE COMMISSIONERS USAGE OF POWER TO CONDUCT FRESH ASSESSMENT WAS ARBITRARY. (G) IT IS HUMBLY SUBMITTED THAT SINCE THE A.O. HAD MADE PROPER ENQUIRIES IN RESPECT OF THE SHARE CAPITAL, THE ORDER OF THE A.O. IS NEITHER ERRONEOUS NOR PREJUDICIAL TO THE INTEREST OF THE REVENUE. (H) IT IS HUMBLY SUBMITTED THAT THE POWER U/S 263 I S A SUPERVISORY POWER WHICH STATES THAT THE COMMISSIONER MAY EXERCISE SUCH POWER ON ANY PROCEEDING OR ORDER UND ER THE ACT. THIS CONNOTES HE POWER EXERCISED BY A QUASI-JU DICIAL AUTHORITY WHICH MUST BE EXERCISED JUDICIALLY. THIS IS A POWER COUPLED WITH DUTY AND IN THE VERY NATURE OF THINGS; THIS PROVISION FOR RE- SSESSING A FINALLY SETTLED A SSESSMENT HAS TO BE STRICTLY CONSTRUED. (I) IT IS FURTHER SUBMITTED THAT THE WORD PREJUDIC IAL SHOULD BE IN CONJUNCTION WITH ERRONEOUS ORDER WHERE THERE MUST BE A PRIMA FACIE DEMONSTRABLE ERROR OF FACT OR LAW. THERE MUST BE A TOTAL NON-APPLICATION OF MIND AND A CONSEQUENT PREJUDICE TO TH REVENUE WHICH IS NOT FOUND IN PRESENT FACTUAL MATRIX. HERE THE ASSESSEE HAD SHOWN EVERY DETAIL REGARDING SHARE CAPITAL AND AO HAD APPLIED HIS MIND AND PASSED A FINAL ORDER. FOR THE CIT TO EXERCISE A SUPERVISORY JURISDICTION, IT SHOU LD BE EXERCISED IN STRICT TERMS ON BLATANT ERROR ON PART OF AO SINCE AO HAS THE ULTIMA TE AUTHORITY U/S 147/148 TO REOPEN THE ASSESSMENT AND PASS A FINAL ORDER. IT IS CONTEN DED THAT COURTS HAVE HELD IN VARIOUS RULINGS THAT EVERY LOSS OF REVENUE AS A CONSEQUENCE OF AN ORDER OF AO CANNOT BE TREATED AS PREJUDICIAL TO THE REVENUE. (J) IT IS THE AO WHO HAS PRIMARY OBLIGATION OF BEIN G SATISFIED WITH THE EXPLANATION OFFERED BY THE ASSESSEE BY APPLYING HIS MIND TO THE FACTS AND CIRCUMSTANCES AND THE CIT MAY NOT INTERFERE UNLESS THERE IS A GRIEVOUS ERROR, WHICH IS NOT THE CASE HERE. ONCE ALL THE MATERIAL WAS BEFORE THE AO AND HE CHOSE NOT TO DEAL WITH THE SEVERAL CONTENTIONS RAISED BY THE COMPANY IN FINAL ASSESSMENT, IT CANNO T BE SAID THAT HE HAD NOT APPLIED HIS MIND TO THE MATERIAL PLACED BEFORE HIM. NON-APPLICA TION OF MIND CANNOT BE INFERRED MERELY BECAUSE THE ASSESSMENT ORDER DOES NOT SPECIF ICALLY DISCUSS THE ISSUE. ITA.NO.1410/K/2013 RIDHI SIDHI V INCOM(P).LTD. A.YR.2008-09 10 (K) IT IS FURTHER SUBMITTED THAT JURISDICTION U/S 2 63 CANNOT BE INVOKED FOR MAKING SHORT ENQUIRIES OR TO GO INTO THE PROCESS OF ASSESSMENT A GAIN AND AGAIN MERELY ON THE BASIS THAT MORE ENQUIRY OUGHT TO HAVE BEEN CONDUCTED TO F IND SOMETHING. (1) IN THE FOLLOWING CASES, UNDER THE SIMILAR CIRCU MSTANCES AS IN THE INSTANT CASE, THE COURTS AND THE TRIBUNAL HAS HELD THAT THE REVISION PROCEEDINGS U/S 263 WAS NOT JUSTIFIED. (I) CIT VS. MEHROTRA BROTHERS 270 ITR 157 (MP) WHEN THE ASSESSEE HAS FURNISHED REQUISITE INFORMATI ON AND THE INCOME-TAX OFFICER HAS CONSIDERED THE RECORDS BEFORE HIM AND COMPLETED THE ASSESSMENT AFIER CONSIDERING THE EVIDENCE FILED AND AFTER HIS SATISFACTION ABOUT THE GENUINENESS OF CASH CREDITS, THE ORDER OF REVISION UNDER SECTION 263 ON VAGUE GROUND THAT THE ASSESSING OFFICER DID NOT MAKE PROPER ENQUIRY IS NOT VALID. (II) CIT VS. RATLAM COAL ASH COMPANY 171 ITR 141(MP ) IN THE INSTANT CASE, THE TRIBUNAL HAS FOUND THAT T HE ASSESSEE HAD FURNISHED ALL THE REQUISITE INFORMATION AND THAT THE INCOME-TAX OFFIC ER, CONSIDERING ALL THE FACTS, HAD COMPLETED THE ASSESSMENT. THE TRIBUNAL FURTHER HELD THAT IN THE CIRCUMSTANCES OF THE CASE, IT COULD NOT BE HELD THAT THE INCOME-TAX OFFI CER HAD MADE THE ASSESSMENT WITHOUT MAKING PROPER ENQUIRIES. IN VIEW OF THESE FINDINGS, THE TRIBUNAL, IN OUR OPINION, WAS JUSTFIED IN LAW IN REVERSING THE ORDER PASSED BY TH E COMMISSIONER OF LNCOME-TAX . (III) RATTAN TRADING CO. VS. INSPECTING ASSTT. COMM ISSIONER 40 ITD 164 (ITAT- DELHI) WHEN THE ASSESSING OFFICER OBSERVED IN HIS ORDER T HAT HE HAD EXAMINED THE BOOKS OF ACCOUNT AND EXAMINED THE STOCK PARTICULARS AND WHEN THE STOCK PARTICULARS SHOWED THE DAMAGED GOODS, IT MUST BE HELD THAT THE ASSESSING O FFICER HAD EXAMINED ALL THE ASPECTS AND D NO LEAVE ANY ASPECT UNTOUCHED OR UNEXAMINED . IV) VIDISHA TRACTORS VS. ACIT 53 TTJ 432 (INDORE BE NCH) IN THE INSTANT CASE WE FIND THAT DURING THE COURSE OF ORIGINAL ASSESSMENT PROCEEDINGS THE ASSESSEE HAD PRODUCED THE BOOKS OF ACCOUNTS AND THE AO HAS HIMSELF MENTIONED THAT SUCH BOOKS OF ACCOUNTS PRODUCED BEFORE HIM WERE SUB JECTED TO TEST CHECK BY HIM AND THAT THE ASSESSMENT IS BEING COMPLETED ON THE BASIS OF INFORMATION SUBMITTED, EXAMINATION OF BOOKS OF ACCOUNTS AND AFTER DISCUSSI ON WITH THE ASSESSEES REPRESENTATIVES. WE FIND THAT THE RELEVANT DETAILS WERE FURNISHED TO THE AO ALONG WITH THE ASSESSEES REPLY DT. L5TH FEB., 1988. IN UR OP INION, MERELY BECAUSE THE AO HAS NOT METICULOUSLY DEALT WITH THE ISSUE OF COMMISSION PAY MENT AND GENUINENESS OF THE CREDIT ENTRIES WHILE COMPLETING THE ASSESSMENT, IT CANNOT BE SAID THAT THERE WAS NO APPLICATION OF MIND BY HIM TO THE FACTS AND DETAILS BEFORE HIM. MERE NON-MENTION OF CERTAIN FACTS SHOULD NOT BE TAKEN AS OMISSION ON THE PART OF THE AO. IT IS QUITE POSSIBLE THAT BECAUSE OF SUBJECTIVE SATISFACTION THE DETAILED DISCUSSION MIGHT NOT HAVE BEEN NEEDED IN THE LIGHT OF THE DOCUMENTS AND MATERIAL ON RECORD. IN THIS VI EW OF THE MATTER WE HOLD THAT THE CIT WAS IN ERROR IN EXERCISING HIS REVISIONARY POWERS U NDER S. 263 OF THE ACT AND AS THE CONDITIONS PRECEDENT FOR EXERCISING SUCH JURISDICTI ON DID NOT EXIST. WE, THEREFORE, QUASH THE IMPUGNED ORDER. ITA.NO.1410/K/2013 RIDHI SIDHI V INCOM(P).LTD. A.YR.2008-09 11 (V) HONBLE GAUHATI HIGH COURT IN THE CASE OF BONGA IGAON REFINERY AND PETROCHEMICALS CASE 287 1TR 120 HELD AS UNDER- ENTERTAINMENT OF A VIEW DIFFERENT FROM THE ONE ADO PTED BY THE ASSESSING OFFICER, IF PLAUSIBLE WOULD NOT CLOTHE THE COMMISSIONER WITH TH E POWER TO INTERFERE THEREWITH UNDER THE SAID PROVISION OF THE ACT. DIFFERENTLY PU T, AN ERROR WITHIN THE JURISDICTION OF THE ASSESSING OFFICER ON AN EVALUATION OF THE MATER IALS AVAILABLE WOULD NOT BE EXPOSED TO INTERFERENCE IN EXERCISE OF SUOMOTU REVISIONAL P OWERS UNDER SECTION 263 OF THE ACT. THE PROVISION THOUGH PERMITS THE COMMISSIONER TO IN ITIATE AN ENQUIRY AS HE MAY DEEM NECESSARY DOES NOT AUTHORISE A ROVING PROBE INTO TH E FACTS WITH THE DISPOSITION TO PICK OUT ERRORS TO SUSTAIN THE EVENTUAL INTERFERENCE. TH IS ASSUMES GREAT SIGNFCANCE IN THE CONTEXT OF THE STATUTORY FRAME WORK OF THE ACT OUTL INING THE JURISDICTIONAL CONTOURS OF DIFFERENT AUTHORITIES TO ADJUDICATE THE ISSUES AS L EGISLATIVELY STIPULATED. THE COMMISSIONER IN EXERCISE OF HIS REVISIONAL POWERS C ANNOT ARROGATE TO HIMSELF A STATUS TO SURROGATE THE OTHER AUTHORITIES AND SUPPLANT THEIR ROLES UNDER THE ACT. (VI) HONBLE SUPREME COURT IN THE CASE OF MALABAR INDUSTRIES CO. 243 ITR 8 3 HELD THAT THE PHRASE PREJUDICIAL TO THE INTEREST OF THE REVENUE HAS TO BE READ IN CONJUNCTION WITH AN ERRONEOUS ORDER PASSED BY THE A.O. EVERY LO SS OF REVENUE AS A CONSEQUENCE OF AN ORDER OF A.O. CANNOT BE TREATED AS PREJUDICIAL T O THE INTEREST OF THE REVENUE. IT WAS FURTHER HELD THAT IF THE A.O. HAS ADOPTED ONE OF TH E COURSES PERMISSIBLE IN LAW OR WHERE TWO VIEWS ARE POSSIBLE AND THE A.O. HAS TAKEN ONE V IEW WITH WHICH CIT DOES NOT AGREE, THE ORDER CANNOT BE TREATED AS ERRONEOUS AND PREJUD ICIAL TO THE INTEREST OFTHE REVENUE URILESS THE VIEW TAKEN BY THE A.O. IS UNSUSTAINABLE IN LAW. (VII) UNDER THE SIMILAR CIRCUMSTANCES, THE HONBLE JURISDICTIONAL HIGH COURT OF KOLKATA IN THE CASE OF CIT VS. M/S. LOTUS CAPITAL FINANCIAL SERVICE LTD., ITAT 125 OF 2012 VIDE ORDER DATED 16.O7.2O12 HELD THE REVISIONARY PR OCEEDINGS U/S. 263 AS INVALID FOLLOWING THE CASE OF MALABAR INDUSTRIAL (SUPRA). ( COPY OF THE ORDER OF HONBLE HIGH COURT IS ANNEXED HEREWITH AND MARKED AS ANNEXURE: B ) 4. GROUND NO. 4 IN THIS GROUND, THE ASSESSEE HAS CHALLENGED THE ACT ION OF THE LD. CIT IN HOLDING THAT CREDITWORTHINESS AND IDENTITY OF THE SHAREHOLDERS F ROM WHOM SHARE CAPITAL MONEY WAS RECEIVED IN THE INSTANT YEAR REMAINS TO BE VERIFIED . IN THIS REGARD, OUR RESPECTFUL SUBMISSIONS ARE BEING MADE HERE UNDER (A) IN THE INSTANT CASE, THE ASSESSEE-COMPANY RAI SED DURING THE YEAR THE SHARE CAPITAL OF RS.33,20,000/- AND ALSO RECEIVED SHARE PREMIUM AMOU NTING TO RS.2,98,80,000/-. IN THE COURSE OF THE RE-ASSESSMENT PROCEEDINGS, ALL THE RE LEVANT DETAILS IN CONNECTION WITH SHARE CAPITAL ALONGWITH THE SUPPORTING DOCUMENTS WERE FIL ED WHICH WERE EXAMIND BY THE A.O. B) THE HONBLE SUPREME COURT IN THE CASE OF LOVELY EXPORT (P,) LTD. 216 CTR 195 HELD THAT ADDITION ON ACCOUNT OF SHARE CAPITAL CANN OT BE MADE IN THE HANDS OF THE RECIPIENT COMPANY. (C) RECENTLY, IN THE CASE OF CIT VS. PEOPLES GENERAL HOSPITAL LTD. 356 ITR 65 (M P), THE HONBLE HIGH COURT HELD AS UNDER ITA.NO.1410/K/2013 RIDHI SIDHI V INCOM(P).LTD. A.YR.2008-09 12 IF THE ASSESSEE HAD RECEIVED SUBSCRIPIION TO THE P UBLIC OR RIGHTS ISSUE THROUGH BANKING CHANNELS AND FURNISHED COMPLETE DETAILS OF THE SHAR EHOLDERS, NO ADDITION COULD BE MADE UNDER SECTION 68 OF THE ACT, IN THE ABSENCE OF ANY POSITIVE MATERIAL OR EVIDENCE TO INDICATE THE SHAREHOLDERS WERE BENAMIDARS OR FICTIT IOUS PERSONS OR THAT ANY PART OF THE SHARE CAPITAL REPRESENTED THE COMPANY S OWN INCOME FROM UNDISCLOSED SOURCES. IT WAS NOBODYS CASE THAT THE NON-RESIDENT INDIAN COMPANY WAS A BOGUS OR NON-EXISTENT COMPANY OR THAT THE AMOUNT SUBSCRIBED BY THE COMPAN Y BY WAY OF SHARE SUBSCRIPTION WAS IN FACT THE MONEY OF THE ASSESSEE. THE ASSESSEE HAD ESTABLISHED THE IDENTITY OF THE INVESTOR WHO HAD PROVIDED THE SHARE SUBSCRIPTION AN D THAT THE TRANSACTION WAS GENUINE. THOUGH IN THIS CASE, THE ASSESSEES CONTENTION WAS THAT THE CREDITWORTHINESS OF THE CREDITOR WAS ALSO ESTABLISHED, BUT ACCORDING TO THE HONBLE HIGH COURT, IN THE LIGHT OF THE JUDGEMENT OF LOVELY EXPORTS P LTD 319 ITR (ST.) 5(SC), HELD THAT WE HAVE TO SEE ONLY IN RESPECT OF THE ESTABLISHMENT OF THE IDENTITY OF THE INVESTOR . (D) FURTHER, KOLKATA BENCH OF ITAT IN THE CASE OF I TO VS. INDIAN FORM CENTRE PVT. LTD., ITA NO. 1985/K/2010, FOLLOWING THE JUDGEMENT OF LOVELY EXPORTS (SUPRA), HELD THAT WE OBSERVE THAT THE TRANSACTIONS ARE DULY RECORDED IN THE AUDITED BOOKS OF ACCOUNTS OF BOTH THE ASSESSEE-COMPANY AS WELL AS AF ORESAID SHARE APPLICANT COMPANIES, WHO PURCHASED SHARES OF THE ASSESSEE-COMPANY. THERE FORE, NO ADDITION ON ACCOUNT OF UNEXPLAINED CASH CREDIT IS WARRANTED IN THE CASE OF THE ASSESSEE ON THE GIVEN FACTS AND CIRCUMSTANCES AS DISCUSSED ABOVE. IN VIEW OF THE AB OVE, IN OUR CONSIDERED OPINION, THE ACTION OF THE A.O. IS CONTRARY TO THE DECISION OF H ONBLE APEX COURT IN THE CASE OF CIT VS. M/S. LOVELY EXPORTS (P) LTD.(SUPRA). COPY OF THE AFORESAID ORDER OF ITAT IS ANNEXED HERE WITH AND MARKED AS ANNEXURE: C. (E) THE HONBLE TRIBUNAL, KOLKATA BENCH AGAIN IN TH E CASE OF ITO VS. M/S. SAVERA SUPPLIERS (P) LTD., ITNO. 12/K/2010, HELD THAT AS IT IS NOTICED FROM THE ASSESSMENT ORDER THAT TH E ASSESSEE HAS PLACED BEFORE THE A O COPIES OF RETURN OF INCOME, BALANCE SHEET AND BANK ACCOUNT DETAILS AS ALSO THE PAN NOS. OF THE APPLICANTS THE ASSESSEE HAS DISCHARGED ITS O NUS IN RESPECT OF THE SHARE APPLICATION MONEY RECEIVED BY IT. FURTHER, IN VIEW OF THE DECIS ION OF THE HONBLE JURISDICTIONAL HIGH COURT IN THE CASE OF CIT VS, M/S. DATAWARE PRIVATE LIMITED ( SUPRA) WHEREIN IT HAS BEEN SPECIFCALLY HELD THAT SO LONG IT IS NOT ESTABLISHE D THAT THE RETURNS SUBMITTED BY THE CREDITOR HAS BEEN REJECTED BY ITS AO, THE AO OF THE ASSESSEE IS BOUND TO ACCEPT THE SAME AS GENUINE WHEN THE IDENTITY OF CREDITOR AND THE GE NUINENESS OF THE TRANSACTION THROUGH ACCOUNT PAYEE CHEQUE HAS BEEN ESTABLISHED. WE ARE O F THE VIEW THAT THE FINDING OF THE LD. CIT(A) IS ON THE RIGHT FOOTING AND DOES NOT CALL FO R ANY INTERFERENCE. THIS VIEW OF OURS ALSO FINDS SUPPORT FROM THE DECISION OF THE HONBLE SUPREME COURT N THE CASE OF CIT VS LOVELY EXPORTS (P)LTD REFERRED TO SUPRA. COPY OF THE AFORESAID ORDER OF ITAT IS ANNEXED HERE WITH AND MARKED AS ANNEXURE:D. (F) IT IS FURTHER SUBMITTED THAT AS PER THE VARIOUS DECIDED CASES, IT WAS NOT NECESSARY FOR THE A.O. TO EXAMINE SOURCE OF SOURCE OF CASH CREDIT S AT THE TIME OF PASSING THE REASSESSMENT ORDER IN THE YEAR 2010. IN THIS REGARD , RELIANCE IS PLACED UPON THE FOLLOWING JUDGEMENTS- (I) NEMI CHAND KOTHARI VS. CIT 264 ITR 254 (GAU). ITA.NO.1410/K/2013 RIDHI SIDHI V INCOM(P).LTD. A.YR.2008-09 13 (II) JALAN TIMBERS V. CIT 223 ITR 11 (GAU, (III) DY. CIT VS. ROHINI BUILDERS 256 ITR 360 (GUJ. ) (IV) CIT V. FIRST POINT FINANCE LILL 286 ITR 477 (R AJ) (V) AC1T VS. SURYA KANTA DALMIA 97 1TD 235 (CAL) IT HAS BEEN HELD BY THE VARIOUS HIGH COURTS THAT TH E ASSESSEE CANNOT BE ASKED TO PROVE SOURCE OF SOURCE OR THE ORIGIN OF ORIGIN VIDE S. HA STIMAL VS. CIT 49 ITR 273 (MAD.), TOLARAM DAGA VS. CIT 59 IR 632 (ASSAM), SARAOGI CRE DIT CORPORATION VS. CIT 103 ITR 344 (PAT.) THIS VIEW FINDS SUPPORT FROM THE RECENT DECISION OF ALLAHABAD HIGH COURT IN THE CASE OF CIT VS. JAUHARIMAL GOEL 147 TAXMAN 448 (ALL). IN VEW OF THE ABOVE THERE WAS NO ERROR IN THE ORDE R OF THE A.O. AS SUCH, IT IS PRAYED THAT THE ORDER PASSED BY THE LD. CIT BE DIRECTED TO BE Q UASHED. 5. GROUND NO. 5 IN THIS GROUND, THE ASSESSEE HAS CHALLENGED THE ACT ION OF THE LD. CIT IN EXERCISING THE REVISIONARY POWER U/S. 263 INSPITE OF THE WELL-SETT LED LEGAL POSITION THAT IN THE ASSESSMENT U/S. 147, THE A.O. IS NOT ENTITLED TO EM BARK UPON A FISHING EXPEDITION AND TO MAKE ROVING ENQUIRIES. (A) IN RESPECT OF THE LD. CITS ALLEGATION THAT INDEPENDENT ENQUIRY WAS NOT CONDUCTED BY THE AO REGARDING THE SOURCE OF FUND FOR THE INVE STMENT IN THE SHARES OF THE ASSESSEE COMPANY, IT IS HUMBLY SUBMITTED THAT IT IS THE CASE OF RE-ASSESSMENT WHICH WAS INITIATED BY THE REVENUE WITH A SPECIFIC REASON THAT THE ASSE SSEE COMPANY DID NOT DISCLOSE COMMISSION INCOME IN THE RETURN OF INCOME AND ADDIT ION IN THIS REGARD WAS ALSO MADE BY THE A.O. IT S HUMBLY SUBMITTED THAT THE A.O. WA S NOT SUPPOSED TO MAKE ANY FISHING AND ROVING ENQUIRIES AND ADD SHARE CAPITAL U/S. 68 OF THE ACT AS THE ASSESSMENT PROCEEDINGS WERE REOPENED ONLY FOR WRONGFUL ALLOWAN CE OF EXPENSE. THE PROVISON OF EXPLANATION 3 TO SEC 147 IS REPRODUCED HEREUNDER- SEC 147: INCOME ESCAPING ASSESSMENT EXPLANATION 3 FOR THE PURPOSE OF ASSESSMENT OR REASSESSMENT UNDER THIS SECTION, THE AO MAY ASSESS OR REASSESS THE INCOME IN RESPECT OF ANY ISSUE, WHICH HAS ESCAPED ASSESSMENT, AND SUCH ISSUE COMES TO HIS NOTICE SUBS EQUENTLY IN THE COURSE OF THE PROCEEDINGS UNDER THIS SECTION, NOTWITHSTANDING THA T THE REASONS FOR SUCH ISSUE HAVE NOT BEEN INCLUDED IN THE REASONS RECORDED U/SUB-SEC (2) OF SEC 148. (B) A PERUSAL OF THE ABOVE REVEALS THAT THE WORDS U SED IN THE EXPLANATION 3 ARE SUCH ISSUE (MEANS ANY OTHER ESCAPED INCOME) COMES T O HIS NOTICE SUBSEQUENTLY IN THE COURSE OF THE PROCEEDINGS UNDER THIS SECTION. ITA.NO.1410/K/2013 RIDHI SIDHI V INCOM(P).LTD. A.YR.2008-09 14 A PLAIN AND SIMPLE READING OF THE EXPLANATION INDIC ATES THAT ANY OTHER ITEM OF ESCAPED INCOME CAN BE TAXED IN THE RE-ASSESSMENT PROCEEDING S WHICH COMES TO THE KNOWLEDGE OF THE A.O. DURNG SUCH PROCEEDINGS. THIS DOES NOT ENV ISAGE MAKING OF ROVING ENQUIRIES AND EMBARKING UPON THE FISHING EXPEDITION. IN THE INSTANT CASE, THE A.O. HAD MADE PROPER ENQUI RIES IN REGARD TO THE SUBJECT MATTER OF REOPENING AND TAXED THE ESCAPED INCOME. THE LD. CIT CANNOT BE HEARD SAYING THAT HE SHOULD HAVE MADE ROVING AND FISHING ENQUIRIES IN RE SPECT OF 100% OF THE SHARE CAPITA1 RAISED. IN THIS REGARD. RELIANCE IS PLACED ON THE F OLLOWING JUDGEMENTS- (I) VIPIRI KHANNA V. CIT (2002) 255 ITR 220 (P&H), THE COURT HELD THAT ASSESSING OFFICER CANNOT EMBARK UPON FRESH ENQUIRIES ON THE ISSUE WHICH ARE UNCONNECTED WITH THE ISSUE WHICH WE RE THE BASIS OF PROCEEDINGS US 1 47. THE FINAIITY OF THE RETURN FILED CANNOT BE DST URBED EVEN N THE PROCEEDINGS U/S 147 OF THE ACT IN RESPECT OF ISSUES ON WHICH THERE IS N O MATERIAL ON RECORD SUGGESTING ANY ESCAPEMENT OF INCOME. THE COURT HELD THAT THERE IS NO GAINSAYING THE FACT THAT IN PROCEEDINGS U/S 1 47 OF THE ACT, IT IS ONLY THE ESC APED INCOME WHICH HAS TO BE ASSESSED OR REASSESSED. (II) SUN ENGINEERING WORKS PVT. LTD. 198 ITR 297 (P & H) WHEN PROCEEDINGS U/S 147 OF THE ACT ARE INITIATED, THE PROCEEDINGS ARE OPEN ONLY QUA ITEMS OF UNDER ASSESSMENT. THE FINALITY OF ASSESSME NT PROCEEDINGS ON OTHER ISSUES REMAINS UNDSTURBED. IT MAKES NO DIFFERENCE WHETHER THE ASSESSMENT PROCEEDINGS HAVE BECOME FINAL ON ACCOUNT OF FRAMING OF AN ASSESSMENT U/S 143(3) OF THE ACT OR ON ACCOUNT OF NON ISSUE OF NOTICE U/S 143(2) OF THE AC T WITHIN STIPULATED PERIOD. (III) AMRINDER SINGH DHIMAN V. AO 269 ITR 378 (P&H) THUS TO CONCLUDE ASSESSING OFFICER CAN BRING TO TAX ANY OTHER INCOME THAT HAVE ESCAPED ASSESSMENT IN THE REASSESSMENT PROCEEDINGS BUT FOR WHICH NO REASONS WERE RECORDED AT THE START OF SUCH PROCEEDINGS, IF SOME NEW MATERIAL COMES INTO PICTURE DURING SUCH PROCEEDINGS SUGGESTING ESCAPEMENT OF NCOME FROM AS SESSMENT. HOWEVER, ASSESSING OFFICER CANNOT EMBARK UPON FRESH ENQUIRIES ON THE I SSUES WHICH ARE UNCONNECTED WITH THE ISSUE WHICH WERE THE BASIS OF PROCEEDINGS U/S 1 47 AND FOR WHICH THERE IS NOTHING ON RECORD TO SUGGEST THAT THERE HAS BEEN ESCAPEMENT OF INCOME. (IV) RANBAXY LABORATORIES LTD. VS. CIT 336 ITR 136 (DEL) THE INTERPRETATION OF EXPLANATION 3 HAS SPECIFICALL Y FALLEN FOR CONSIDERATION IN THE NSTANT CASE. IT WAS HELD AS UNDER- AS PER EXPLANATION (3) IF DURING THE COURSE OF THES E PROCEEDINGS THE ASSESSING OFFICER COMES TO CONCLUSION THAT SOME ITEMS HAVE ESCAPED AS SESSMENT, THEN NOTWITHSTANDING THAT THOSE ITEMS WERE NOT INCLUDED IN THE REASONS T O BELIEVE AS RECORDED FOR INITIATION OF THE PROCEEDINGS AND THE NOTICE, HE WOULD BE COMPETE NT TO MAKE ASSESSMENT OF THOSE ITEMS. HOWEVER. THE LEGISLATURE COULD NOT BE PRESUM ED TO HAVE INTENDED TO GIVE BLANKET POWERS TO THE ASSESSING OFFICER THAT ON ASSUMING JU RSDICTION UNDER SECTION 147 ITA.NO.1410/K/2013 RIDHI SIDHI V INCOM(P).LTD. A.YR.2008-09 15 REGARDING ASSESSMENT OR REASSESSMENT OF ESCAPED INC OME, HE WOULD KEEP ON MAKING ROVING INQUIRY AND THEREBY INCLUDING DIFFERENT ITEM S OF INCOME NOT CONNECTED OR RELATED WITH THE REASONS TO BELIEVE, ON THE BASIS OF WHICH HE ASSUMED JURISDICTION. FOR EVERY NEW ISSUE COMING BEFORE ASSESSING OFFICER DURING TH E COURSE OF PROCEEDINGS OF ASSESSMENT OR REASSESSMENT OF ESCAPED INCOME, AND W HICH HE INTENDS TO TAKE INTO ACCOUNT, HE WOULD BE REQUIRED TO ISSUE A FRESH NOTI CE UNDER SECTION 148. V) IN THE FOLLOWING RECENT CASES, IT WAS HELD THAT THE A.O. CANNOT MAKE GENERAL AND FISHING ENQUIRIES QUA UNCONNECTED ISSUES (A) TRAVANCORE CEMENTS LTD. VS. CIT 305 ITR 1 70 (K ER) (B) JAI BHARAT MARUTI LTD. VS. CIT 324 ITR 289 (DEL ) (VI) HONBLE SUPREME COURT IN THE CASE OF CIT VS. ALAGENDRAN FINANCE LUL 293 ITR 1 HELD THAT THERE MAY NOT BE ANY DOUBT OR DISPUTE THAT ONCE AN ORDER OF ASSESSMENT IS REOPENED, THE PREVIOUS UNDERASSESSMENT WILL BE HELD TO BE SET ASIDE AND THE WHOLE PROCEEDINGS WOULD START AFRESH BUT THE SAME WOULD N OT MEAN THAT EVEN WHEN THE SUBJECT- MATTER OF REASSESSMENT IS DISTINCT AND DIFFERENT, T HE ENTIRE PROCEEDING OF ASSESSMENT WOULD BE DEEMED TO HAVE BEEN REOPENED. 6. GROUND NO. 6 THE LD. CIT HAS GIVEN CERTAIN DIRECTIONS IN THE LAS T PARA OF HIS ORDER AS TO HOW THE FRESH ASSESSMENT IS TO BE FRAMED BY THE A.O. IT HAS BEEN HELD BY THE HONBLE GAUHATI HIGH COURT IN THE CASE OF BONGAIGAON REFINERIES 287 ITR 120 THAT THE CIT IN EXERCISE OF HIS REVISIONAL POWERS CANNOT ARROGATE TO HIMSELF A STATUS TO SURROGATE THE OTHER AUTHORITIES AND SUPPLANT THEIR ROLES UNDER THE ACT. THUS, THE DIRECTION GIVEN BY THE LD. CIT AS TO HOW THE ENQUIRIES ARE TO BE CONDUCTED IN THE MATTER OF SHARE CAPITAL IS BEYOND THE POWERS CO NFERRED U/S 263. IN VIEW OF THE ABOVE RESPECTFUL SUBMISSIONS, THE AP PEAL OF THE ASSESSEE MAY PLEASE BE ALLOWED. 7. FURTHER, THE LD. AR SUBMITTED THAT THE ISSUE OF NOTICE TO THE ASSESSEES APPEAL COULD BE CONSIDERED INTO SEVEN GROUNDS AS FOLLOWS : - 1. WHETHER THE ORDER PASSED U/S 263 BY THE CIT IS BARRED BY LIMITATION ? 2. WHETHER THE ORDER OF THE AO PASSED U/S 147 CAN B E SAID TO BE ERRONEOUS AND PREJUDICIAL TO THE INTEREST OF REVENUE FOR LACK OF PROPER INQUIRIES AS TO THE ISSUE OF SHARE CAPITAL/PREMIUM WHEN THE RE-OPENING WAS DONE FOR TH E SPECIFIC PURPOSE OF ESCAPEMENT OF COMMISSION INCOME? ITA.NO.1410/K/2013 RIDHI SIDHI V INCOM(P).LTD. A.YR.2008-09 16 3. WHETHER THE CIT WAS JUSTIFIED IN HOLDING THE ORD ER PASSED BY THE A.O. TO BE ERRONEOUS ON THE ISSUE OF SHARE CAPITAL/PREMIUM WHE N NO ADDITION U/S 68 CAN BE MADE IN THE INSTANT CASE IN VIEW OF THE JUDGMENTS OF THE HO NBLE SUPREME COURT IN THE CASE OF LOVELY EXPORT 216 CTR AND ALSO IN THE CASE OF BHARA T ENGINEERING & CONSTRUCTION CO.LTD. 83 ITR 187? 4. WHETHER CIT IN EXERCISE OF POWER U/S 263 CAN GIV E DIRECTION IN RESPECT OF SUBSEQUENT YEAR FOR WHICH REVISIONARY POWER U/S 263 HAS NOT BE EN EXERCISED? 5. WHETHER THE ORDER PASSED BY THE A.O. CAN BE SAID TO BE ERRONEOUS AND PREJUDICIAL TO THE INTEREST OF REVENUE WHEN THE A.O. HAS PASSED TH E ORDER AFTER INQUIRY OR INVESTIGATION ON THE ISSUE OF SHARE CAPITAL? 6. WHETHER THE CIT WAS CORRECT IN HOLDING THE ORDER PASSED BY THE A.O. TO BE ERRONEOUS ON THE BASIS OF A GENERALIZED BACKGROUND IN THE ABS ENCE OF SPECIFIC MATERIAL AGAINST THE ASSESSEE? 7. WHETHER THE CIT OUGHT TO HAVE MADE INQUIRIES HIM SELF BEFORE COMING TO THE CONCLUSION THAT THE ORDER OF THE A.O. ERRONEOUS AND PREJUDICIAL TO THE INTEREST OF REVENUE? 8. BEFORE GOING INTO THE ISSUES RAISED, THE FACTS L EADING TO THIS APPEAL IS SET OUT HEREIN BELOW :- THE ASSESSMENT YEAR INVOLVED IS THE ASSESSMENT YEAR 2008-09. FOR THE RELEVANT ASSESSMENT YEAR THE ASSESSEE HAS FILED ITS RETURN O F INCOME ON 30.03.2009 DECLARING AN INCOME OF RS.1,170/-. AN INTIMATION U/S 143(1) WAS ISSUED ON 21.12.2009. SUBSEQUENTLY A LETTER DATED NIL WAS FILED ON 08.0 7.2010 TO THE AO MENTIONING THAT IN THE COURSE OF PREPARATION OF BOOKS OF ACCOUNTS FOR THE FINANCIAL YEAR 2007-08 ONE ITEM OF INCOME RELATING TO THE COMMISSION RECEIVABLE TOW ARDS FINALIZATION OF A PROPERTY DEALING AMOUNTING TO RS.21,000/- WAS OMITTED TO BE INCORPORATED IN THE BOOKS OF ACCOUNTS. IT WAS SPECIFIED THAT THE MISTAKE WAS IDE NTIFIED AFTER THE FINALIZATION OF AUDIT AND FILING THE INCOME TAX RETURN. THE SAID LETTER W AS SIGNED BY ONE SHRI KAUSHIK CHOWDHURY AS A DIRECTOR OF THE ASSESSEE COMPANY. TH E SAID LETTER WAS ALSO ACCOMPANIED BY THE DIRECTORS REPORT AS ALSO THE AU DITORS REPORT BOTH DATED 5 TH SEPTEMBER, 2008. ON THE BASIS OF THIS LETTER RECEIV ED THE AO HAD ISSUED A NOTICE U/S 148 DATED 30.08.2010, THE SAME WAS SERVED BY HAND A S PER THE ACKNOWLEDGEMENT SLIP ON 31.08.2010. THERE IS NO SIGNATURE AS TO WHO HAS SERVED THIS 148 NOTICE. ALSO A PERUSAL OF THE TEAR OF ACKNOWLEDGEMENT SHOWS THAT T HE PERSON WHO HAS SIGNED ON BEHALF OF THE ASSESSEE COMPANY IS ALSO NOT MENTIONE D. IN RESPONSE TO 148 NOTICE SHRI KAUSHIK CHOWDHURY AGAIN AS A DIRECTOR OF THE ASSESS EE COMPANY VIDE A LETTER DATED NIL FILED BEFORE THE INCOME TAX OFFICER ON 28 TH SEPTEMBER, 2010 REQUESTED THAT THE ITA.NO.1410/K/2013 RIDHI SIDHI V INCOM(P).LTD. A.YR.2008-09 17 ORIGINAL RETURN FILED ON 30.03.2009 WAS LIABLE TO B E TREATED AS RETURN IN RESPONSE TO THE NOTICE U/S 148. NOTICES U/S 142(1) AND 143(2) DATED 04.10.2010 WERE ISSUED AND THE SAME HAS BEEN SERVED BY HAND ON 07.10.2010. THE DIR ECTORS REPORT AND THE BALANCE SHEET, P & L A/C, SCHEDULES THERETO ARE SIGNED BY S HRI RAKESH AGARWAL AS ONE OF THE DIRECTORS AND SHRI DEO KANT SINGH AS ANOTHER DIRECT OR. SHRI DEO KANTI SINGH, SON OF SHRI KISHAN SINGH HAS SIGNED THE VERIFICATION COLUM N OF THE RETURN OF INCOME. ONE SHRI J.KUMARR.DAS, SON OF SHRI ASIT BORA DAS AS THE DIRECTOR OF THE ASSESSEE COMPANY HAS PROVIDED THE POWER OF ATTORNEY TO ONE SHRI VISH AL AGARWAL, FCA TO REPRESENT THE ASSESSEE BEFORE THE AO, WARD-9(3). THE POWER OF ATT ORNEY IS UNDATED AND ON RS.10/- NON JUDICIAL STAMP AND THE DATE OF PURCHASE OF THE SAID STAMP PAPER IS 10 TH SEPTEMBER, 2010.. THE REPLY TO THE NOTICE U/S 142(1) IS BY A L ETTER DATED 11.10.2010 FILED ON 3 RD NOVEMBER, 2010. THIS IS SIGNED BY AN AUTHORISED SIG NATORY. THE NAME IS NOT SPECIFIED AND THIS SIGNATURE IS AGAIN COMPLETELY NEW. IN THE SAID REPLY THE ASSESSEE HAS PROVIDED THE COMPLETE AUDITED FINANCIAL STATEMENT ALONG WITH THE COMPUTATIONS, DETAILS OF DIRECTORS, COPY OF THE BANK STATEMENT AND THE DETAI LS OF THE SHARE APPLICATION MONEY INCLUDING THE NAMES AND ADDRESSES OF THE PARTIES. I NTERESTINGLY A PERUSAL OF THE ASSESSMENT RECORDS SHOWS THAT THE DETAILS OF THE DI RECTORS AS HAS BEEN MENTIONED IS NOT FOUND THOUGH MENTIONED IN THE LETTER. ON THE BASIS OF THIS LETTER NOTICE U/S 133(6) ARE SAID TO HAVE BEEN ISSUED TO THE SHARE APPLICANTS ON 04.11.2010 AGAIN SERVED BY HAND BUT THE DATE OF SERVICE AND THE IDENTIFICATION OF T HE PERSON WHO HAS SERVED THE SAID NOTICES ARE BLANK. THE RESPONSES TO THE NOTICE U/S 133(6) HAVE BEEN FILED BEFORE ITO,WARD-9(3) BY HAND ON 18.11.2010 AND INTERESTING LY HERE ALSO OUT OF 5, THREE HAVE BEEN FILED TOGETHER IN SERIATUM. ALL THE REPLIES TO THE NOTICES U/S 133(6) ARE UNDATED. THE ASSESSEE HAS FILED A LETTER DATED NIL IN THE COURSE OF THE ASSESSMENT U/S 148 THAT THE ASSESSEE HAS RECEIVED THE COMMISSION OF RS.21,0 00/- FROM TWO SPECIFIC PERSON BEING SHRI PANKAJ KR.AGARWAL AND SHRI NAVIN KR.AGAR WAL. SUBSEQUENTLY ON 24.11.2010 THE ASSESSMENT ORDER U/S 143(3) R.W.S.14 7 IS COMPLETE BRINGING TO TAX THE ADDITION COMMISSION INCOME OF RS.21,000/- AS OFFERE D AND ALSO PENALTY PROCEEDINGS U/S 271(1)(C) HAD BEEN INITIATED BUT SUBSEQUENTLY D ROPPED. THUS FROM THE TIME OF ISSUANCE OF NOTICE U/S 148 TO THE PASSING OF ORDER U/S 143(3) R.W.S. 147 INCLUDING THE ALLEGED VERIFICATIONS ALL ARE CULMINATED IN EXACTLY LESS THAN THREE MONTHS. THE ORDER U/S ITA.NO.1410/K/2013 RIDHI SIDHI V INCOM(P).LTD. A.YR.2008-09 18 263 HAVING BEEN PASSED ON 28.03.2013 THE CONSEQUENT IAL ASSESSMENT HAD BEEN COMPLETED U/S 143(3) R.W.S.144 ON 31.03.2014. A PE RUSAL OF THE ASSESSMENT ORDER PASSED IN CONSEQUENCE TO THE ORDER PASSED U/S 263, THERE IS NO COOPERATION. THOUGH 131 NOTICES HAVE BEEN ISSUED ALONG WITH 133(6) HAVE BEEN ISSUE THERE IS NO RESPONSE TO THE 131 NOTICES, ALSO SOME OF THE 133(6) NOTICES HAVE BEEN RETURNED UNSERVED, BUT ALL THE 5 COMPANIES HAVE RESPONDED AND THE RESPONSE TO 133(6) THOUGH FROM COMPANIES HAVING ADDRESSES IN KOLKATA, THE VARIOUS PARTS OF KOLKATA SUCH AS EZRA STREET, PRINCIP STREET, PRETORIA ST.,. M.G.ROAD, GA NESH CHANDRA AVENU3, EVEN SURAT, CANNING STREET, ETC. ALL REPLY IN THE SAME LANGUAGE USING THE SAME WORDS AND COMMITTING THE SAME SPELLING MISTAKE AND THEY ARE A LL RESPONDED TO BY HAND AGAIN ON THE SAME DAY AND FILED IN SEARIATUM. BUT THEY ARE S IGNED BY DIFFERENT PEOPLE. IN THE PRESENT CASE THE SPELLING MISTAKE IDENTIFIED WHICH IS IDENTICAL IN ALL THE CASES IS IN THE CERTIFICATE ISSUED WHEREIN THE CHEQUE NO. IS BEING WRONGLY SPELT AS CHAQUE INSTEAD OF CHEQUE. IN ANY CASE THE PROCEEDINGS SUBSEQUENT T O 263 IS NOT THE ISSUE BEFORE THE TRIBUNAL AND THE ISSUE BEFORE THE TRIBUNAL IS ORDER U/S 263. 9. COMING TO EACH OF THE ISSUES RAISED BY THE LD. A R. IN RESPECT OF THE FIRST ISSUE AS TO WHETHER THE ORDER PASSED U/S 263 BY THE LD. C IT IS BARRED BY LIMITATION. IT HAS BEEN ARGUED BY THE LD. AR THAT IN THE REOPENING PRO CEEDINGS U/S 147 THE ISSUE OF SHARE CAPITAL WAS NOT THE ISSUE AS PER THE REASONS RECORD ED IN THE ORDER SHEET. IT WAS THE SUBMISSION THAT AS THE ISSUE WAS TOTALLY DIFFERENT FROM THE ISSUE OF REOPENING AND THE ASSESSMENT ORDER HAVING BEEN PASSED ONLY SUCH ISSUE S AS HAVE BEEN CONSIDERED IN THE REOPENED ASSESSMENT FRESH ISSUES COULD NOT BE THE S UBJECT MATTER OF THE REVISION ORDER U/S 263. IT WAS THE SUBMISSION THAT AS THE ISSUE OF SHARE CAPITAL IS NOT THE ISSUE IN THE REOPENING OF THE ASSESSMENT AS ALSO THE CONSEQUENTI AL ASSESSMENT ORDER PASSED U/S 147 R.W.S. 143(3) THE LD. CIT COULD NOT HAVE CONSIDERED THE SAID ASSESSMENT ORDER FOR THE PURPOSE OF COMPUTING THE LIMITATION. CONSEQUENTLY I T IS THE INTIMATION WHICH WAS ISSUED ON 21.1.2009 WHICH WOULD HAVE BEEN CONSIDERE D AND AS THE ORDER U/S 263 WAS PASSED BEYOND THE LIMITATION PERIOD OF TWO YEARS FR OM THE END OF THE FINANCIAL YEAR IN WHICH INTIMATION U/S 143(1) WAS PASSED. ORDER U/S 2 63 IS BARRED BY LIMITATION. ITA.NO.1410/K/2013 RIDHI SIDHI V INCOM(P).LTD. A.YR.2008-09 19 10. TO THIS THE REVENUE HAD SUBMITTED THAT 143(1) W AS AN INTIMATION AND NOT AN ORDER. IT WAS ALSO SUBMITTED THAT ONCE THE ASSESSME NT IS REOPENED U/S 147 THEN ALL ISSUES ARE LEFT OPEN. IN THE PRESENT CASE THE REOPE NING HAVING NOT BEEN CHALLENGED IN THE ORIGINAL PROCEEDINGS THE ISSUE OF SHARE CAPITAL COULD BE CONSIDERED IN THE 263 PROCEEDINGS. 11. WE HAVE CONSIDERED THE RIVAL SUBMISSIONS. IN TH E PRESENT CASE ADMITTEDLY THE ASSESSEE HAS FILED A LETTER DATED NIL INFORMING T HE AO OF THE COMMISSION INCOME HAVING BEEN OMITTED TO HAVE BEEN OFFERED TO TAX. IN THE SAID LETTER THE ASSESSEE HAS ALSO ENCLOSED PROFIT AND LOSS ACCOUNT. IT IS ON THE BASI S OF THIS LETTER THAT NOTICE U/S 148 WAS ISSUED. ADMITTEDLY IN THE LETTER AND RESPONSE TO TH E NOTICE U/S 148 THE ASSESSEE ITSELF HAS BACK TRACKED ON ITS LETTER EARLIER FILED HAVING THE ESCAPED INCOME. HOWEVER, IN THE COURSE OF 142(1) PROCEEDINGS THE ASSESEE VOLUNTARIL Y HAS PRODUCED DETAILS OF THE SHARE APPLICATION AND THE SHARE PREMIUM RECEIVED BY THE A SSESSEE. THUS WHAT IS EVIDENT IS THE ASSESSEE WAS METICULOUSLY BY DESIGN DRAWN THE A TTENTION OF THE AO TO THE SHARE APPLICATION MONEY AND THE SHARE PREMIUM. THE AO HAS ISSUED 133(6) NOTICE, HOWEVER, HOW THE SAME HAS BEEN SERVED IS CONSPICUOUS BY ITS ABSENCE, IN SO FAR AS, THERE IS NO EVIDENCE AS TO WHO HAS SERVED THIS 133(6) NOTICE. T HERE ARE ONLY TEAR OF ACKNOWLEDGEMENTS. IDENTITY OF THE PERSON SERVING TH E NOTICE IS ABSENT. THE RESPONSES TO 133(6) ARE ALSO BY HAND. NOW THE ISSUE IS, HAS T HE AO APPLIED HIS MIND OR FORMED AN OPINION ON THE SHARE APPLICATION MONEY AND SHARE PREMIUM WHEN HE PASSED THE ORIGINAL ASSESSMENT ORDER U/S 143(3) R.W.S.147. THA T WOULD BE DISCUSSED IN A SEPARATE PART OF THE ORDER. NOW THE ASSESSEE HAVING DRAWN TH E ATTENTION OF THE AO TO THE SHARE APPLICATION MONEY AND SHARE PREMIUM AND THE AO HAVI NG ISSUED NOTICES U/S 133(6) ON THE BASIS OF THE DESIGN OF THE ASSESSEE OBVIOUSLY I T WOULD HAVE TO BE CONSTRUED THAT ISSUE WAS ALSO OPEN BEFORE THE AO IN THE COURSE OF THE REOPENED ASSESSMENT. CONSEQUENTLY IF THERE IS ANY ERROR WHICH IS PREJUDI CIAL TO THE INTEREST OF THE REVENUE ON THE ISSUE OF SHARE APPLICATION MONEYS AND SHARE PREMIUMS THEN IT WOULD BE IN THE REOPENED ASSESSMENT WHICH HAS BEEN RIGHTLY REVISED BY THE LD. CIT U/S 263. IF THIS RE- ASSESSMENT ORDER IS TAKEN INTO CONSIDERATION THEN T HE ORDER PASSED U/S 263 IS WELL WITHIN THE LIMITATION. FURTHER, A PERUSAL OF THE OR DER PASSED U/S 263 CLEARLY SHOWS THAT ITA.NO.1410/K/2013 RIDHI SIDHI V INCOM(P).LTD. A.YR.2008-09 20 IT IS THIS REASSESSMENT ORDER WHICH THE LD. CIT HAS HELD TO BE ERRONEOUS AND PREJUDICIAL TO THE INTEREST OF THE REVENUE, IN SO FAR AS, NO IN VESTIGATION WHATSOEVER HAVE BEEN DONE BY THE AO, MUCH LESS ANY INVESTIGATION WORTH I TS NAME. THIS IS ALSO CLEARLY EVIDENCE FROM THE ORDER SHEET NOTINGS IN THE ASSESS MENT FOLDER. IN THE CIRCUMSTANCES WE ARE OF THE VIEW THAT THE ORDER PASSED U/S 263 IS NOT BARRED BY LIMITATION. CONSEQUENTLY ISSUE NO.1 IS HELD AGAINST THE ASSESSE E. 12. IN RESPECT OF ISSUE NO.2 WHICH HAS BEEN RAISED BY THE LD. AR AS TO WHETHER THE ORDER PASSED BY THE AO U/S 147 CAN BE CONSIDERED ER RONEOUS AND PREJUDICIAL TO THE INTEREST OF THE REVENUE FOR LACK OF PROPER ENQUIRY AS TO THE ISSUE OF SHARE CAPITAL PREMIUM WHEN THE REOPENING WAS DONE FOR THE SPECIFI C PURPOSE OF ESCAPEMENT OF COMMISSION INCOME. IN RESPECT OF THIS ISSUE IT WAS SUBMITTED THAT THE REOPENING ACTUALLY WAS DONE BY BRINGING TO TAX THE ESCAPEMENT OF COMMISSION INCOME. NOW JUST BECAUSE OF THE LACK OF PROPER ENQUIRY OF SHARE CAPI TAL AND PREMIUM WHETHER THE SAID ORDER CAN BE HELD TO BE ERRONEOUS AND PREJUDICIAL T O THE INTEREST OF THE REVENUE WAS NOT APPLICABLE. IT WAS THE SUBMISSION THAT THE LEGI SLATURE COULD NOT BE PRESUMED TO HAVE INTENDED TO GIVE BLANKET POWERS TO THE AO THAT ON ASSUMING JURISDICTION U/S 147 REGARDING THE ASSESSMENT OR RE-ASSESSMENT OF ESCAPE D INCOME HE WOULD KEEP ON MAKING ROVING ENQUIRY AND THEREBY INCLUDE DIFFERENT ITEMS OF INCOME NOT CONNECTED OR RELATED WITH THE REASON TO BELIEVE ON THE BASIS OF WHICH HE ASSUMES JURISDICTION. IT WAS THE SUBMISSION THAT ON THIS GROUND THE ORDER PASSED U/S 263 WAS LIABLE TO BE QUASHED. HE PLACED RELIANCE ON THE DECISION OF THE DELHI HIG H COURT IN THE CASE OF RANBAXY LABORTATORIES LIMITED REPORTED IN 336 ITR 136. 13. IN REPLY THE LD. DR SUBMITTED THAT THE REOPENIN GS HAD BEEN DONE ON THE BASIS OF THE DISCLOSURE MADE BY THE ASSESSEE VIDE A LETTER D ATED NIL. IT WAS THE ASSESSEE WHO GAVE INFORMATION REGARDING THE SHARE CAPITAL AND SH ARE PREMIUM. NOW IT IS NO MORE FOR THE ASSESSEE TO CHANGE ITS STAND. 14. WE HAVE CONSIDERED THE RIVAL SUBMISSIONS. ADMIT TEDLY THE AO CANNOT IN A REOPENED ASSESSMENT DO ROVING ENQUIRY, BUT WHAT IS TO BE UNDERSTOOD IN THE PRESENT ITA.NO.1410/K/2013 RIDHI SIDHI V INCOM(P).LTD. A.YR.2008-09 21 CASE IS THAT IT IS NOT THE REASSESSMENT WHICH ARE I N APPEAL BEFORE US, IT IS REVISIONARY PROCEEDINGS. IF AT ALL, THE ASSESSEE WANTED TO CHAL LENGE THE SO CALLED ROVING ENQUIRY WHICH HAS BEEN DONE BY DESIGN, AS WE MAY REPEATEDLY SAY, IT WAS TO BE DONE WITHIN THE PRESCRIBED TIME PROVIDED IN RESPECT OF REOPENED ASSESSMENT IT IS NOT SOMETHING THAT CAN BE DONE IN AN APPEAL AGAINST THE REVISIONA RY ORDER PASSED U/S 263. THE ASSESSEE HIMSELF HAVING BROUGHT TO THE ATTENTION TH E ISSUES TO THE AO AND THE AO HAVING NOT DONE ANY INVESTIGATION AND AS RIGHTLY SU BMITTED BY THE LD. AR, BEING LACK OF PROPER ENQUIRIES AS TO THE ISSUE OF SHARE CAPITA L AND PREMIUM, THE ACTION OF THE LD. CIT IN INVOKING THE PROVISIONS OF 263 IS ON A RIGHT FOOTING AND DOES NOT CALL FOR ANY INTERFERENCE. CONSEQUENTLY ISSUE NO.2 IS HELD AS AG AINST THE ASSESSEE. 15. COMING TO THE ISSUE NO.3, IT WAS SUBMITTED THAT THE ISSUE WAS WHETHER THE LD. CIT WAS JUSTIFIED IN HOLDING THAT THE ORDER PASSED BY THE AO IS ERRONEOUS ON THE ISSUE OF SHARE CAPITAL/PREMIUM WHEN NO ADDITION CAN BE MA DE U/S 68 OF THE ACT IN THE INSTANT CASE IN VIEW OF THE JUDGMENTS OF THE HONBL E SUPREME COURT IN THE CASE OF LOVELY EXPORT 216 CTR 195 AND ALSO IN THE CASE OF B HARAT ENGINEERING & CONSTRUCTION CO.LTD. 83 ITR 187. IT WAS THE SUBMISS ION THAT AS HAS BEEN HELD IN THE DECISION OF BHARAT ENGINEERING & CONSTRUCTION CO. L TD. IN THE FIRST YEAR OF ITS CREATION THE ASSESSEE CANNOT HAVE AN UNDISCLOSED INCOME. IN REPLY THE LD. DR SUBMITTED THAT IF THESE WERE OPENING SHARE CAPITAL OR INITIAL SHARE C APITAL IT COULD HAVE BEEN HELD THAT THE COMPANY COULD NOT HAVE EARNED UNDISCLOSED INCOME. I T WAS THE SUBMISSION THAT THESE ARE SHARE CAPITALS/PREMIUMS ISSUES FRAUDULENTLY FOR CONVERTING THE BLACK MONEY, MORE SO IN THE NATURE OF MONEY LAUNDERING ACTIVITIES AND THEY HAVE BEEN DONE AFTER THE FORMATION OF THE COMPANY AND THESE WERE RIGHTLY LIA BLE TO BE HELD AS UNDISCLOSED INCOME OF THE ASSESSEE U/S 68 OF THE ACT. IT WAS AL SO THE SUBMISSION THAT IN LOVELY EXPORTS THE HONBLE SUPREME COURT HAS HELD THAT IF THE IDENTITY, PAN NO. ETC. ARE GIVEN THEN THE SHARE CAPITAL SHOULD NOT BE ADDED TO THE UNDISCLOSED INCOME OF THE ASSESSEE U/S 68 OF THE ACT. IT WAS THE SUBMISSION T HAT IN THE PRESENT CASE THE ASSESSEE ITSELF HAS INVESTED IN THE SHARE APPLICATION OF OTH ER SUCH MONEY LAUNDERING COMPANIES AND IT IS THE SOURCE OF THE ASSESSEE COMPANY WHICH IS BEING VERIFIED AND THE HONBLE SUPREME COURT IN THE CASE OF LOVELY EXPORT HAS CLEA RLY HELD THAT THE AO IS AT LIBERTY ITA.NO.1410/K/2013 RIDHI SIDHI V INCOM(P).LTD. A.YR.2008-09 22 TO ASSESS THE SAME IN THE HANDS OF THE SHARE APPLIC ANTS. NOW THE ASSESSEE ITSELF IS A SHARE APPLICANT OF OTHER COMPANIES. THEREFORE EVEN THE ASSESSEE HAS TO EXPLAIN ITS SOURCE. IT WAS ALSO THE SUBMISSION THAT THE PROVISO TO SECTION 68 HAS BEEN INTRODUCED W.E.F. 01.04.2013. IT WAS THE SUBMISSION THAT THIS PROVISO BEING PROCEDURAL PROVISO IS NOT LINKED TO THE ASSESSMENT ORDER BUT TO THE YEAR OF ASSESSMENT. IT WAS THE SUBMISSION THAT THOUGH THE ASSESSMENT YEAR IS 2008-09 IN VIEW OF THE FACT THAT THE 263 ORDER HAS BEEN PASSED AND THE ASSESSMENT IS BEFORE THE AO THE PROVISION OF PROVISO TO SECTION 68 WAS RIGHTLY AVAILABLE TO THE AO. 16. WE HAVE CONSIDERED THE RIVAL SUBMISSIONS. AS HA S BEEN RIGHTLY POINTED OUT BY THE LD. DR A PERUSAL OF THE BALANCE SHEET OF THE AS SESSEE SHOWS THAT THE ASSESSEE HAS MADE INVESTMENTS IN OTHER COMPANIES ALSO. WE WOULD NOT GO TO THE EXTENT OF CALLING OR TERMING THE OTHER COMPANIES AS MONEY LAUNDERING COM PANIES AS THEY ARE NOT BEFORE US AND THEIR FACTS ARE NOT BEFORE US. ADMITTEDLY THIS IS NOT THE INITIAL SHARE APPLICATION. THE ASSESSEE CAME INTO EXISTENCE ON 20 TH NOVEMBER, 2007 WITH AN INITIAL SHARE CAPITAL OF ABOUT RS.1 OR 2 LAKH. THE ASSESSEE DECIDE TO INC REASE ITS SHARE CAPITAL VIDE AN ORDINARY MEETING OF THE MEMBERS OF THE COMPANY HELD ON 31.03.2008 AND INCREASED THE AUTHORISED SHARE CAPITAL OF THE COMPANY FROM RS .2 LAKHS TO RS.35 LAKHS. THIS INCREASED SHARE CAPITAL IS IN THE FORM OF 3,30,000 NUMBER OF EQUITY SHARES OF RS.10/- EACH. THE ORIGINAL SHAREHOLDERS WERE SHRI VIVEK KR .AGARWAL AND SHRI ROHIT KR.AGARWAL. FORM NO.5 TO INCREASE IN THE AUTHORISED SHARE CAPITAL HAS BEEN FILED ONLY ON 08.09.2010 BY SHRI VISHAL AGARWAL AND THE FORM H AS BEEN DIGITALLY SIGNED BY SHRI KAUSHIK CHOWDHURY AND HE HAS BEEN AUTHORISED TO DO SO BY THE BOARD RESOLUTION NO.1 DATED 05.08.2010. THE RECEIPT FOR THE FEES FOR THE INCREASE IN THE AUTHORISED SHARE CAPITAL IS PAID ON 24.08.2010. HOWEVER, THE SHARE C APITAL HAS BEEN INCREASED AND SHARE APPLICATIONS CALLED FOR HAVE BEEN MADE AT A PREMIUM ON 4.3.2008. NOW THIS ITSELF SHOULD HAVE DRAWN THE ATTENTION OF THE AO. THE ISSU E OF SECTION 68 WOULD CLEARLY APPLY IN THE PRESENT CASE, IN SO FAR AS, THE PROVIS O WHICH HAS BEEN ADDED W.E.F. 01.04.2013 SPECIFICALLY PROVIDES FOR VERIFICATION O F THE SOURCE OF THE SOURCE ESPECIALLY IN RESPECT OF SHARE APPLICATION MONEY, SHARE CAPITA L, SHARE PREMIUM OR ANY SUCH AMOUNT, BY WHATEVER NAME CALLED. THE AO HAVING NOT CONDUCTED THE ENQUIRY TO ITS ITA.NO.1410/K/2013 RIDHI SIDHI V INCOM(P).LTD. A.YR.2008-09 23 LOGICAL END AND HAVING BEEN CARRIED AWAY BY THE DES IGN OF THE ASSESSEE, WE ARE OF THE VIEW THAT THE LD. CIT WAS RIGHT IN INVOKING THE PRO VISION OF SECTION 263. HERE WE MAY SPECIFICALLY MENTION THAT PROVISO TO SECTION 68 HAS BEEN INTRODUCED AFTER THE DECISION OF THE HONBLE SUPREME COURT IN THE CASE OF LOVELY EXPORTS AND CONSEQUENTLY AS THE PROVISO IS NOW APPLICABLE THE AO WOULD BE RIGHT IN VERIFYING THE SOURCE OF THE SOURCE. A QUESTION WOULD ARISE AS TO HOW THE ORDER U/S 26 P ER SE CAN SURVIVE AS THE PROVISO HAS BEEN INTRODUCED W.E.F. 01.04.2013 AND THE ORDER U/S 263 HAS BEEN PASSED IN MARCH, 2013. FOR THIS WHAT IS TO BE UNDERSTOOD IS THAT INV OCATION OF THE PROVISO OF SECTION 68 HAS NOT BEEN DONE BY THE LD. CIT AND THAT THE LD. C IT HAS DONE IN HIS ORDER U/S 263 IS TO TREAT THE REASSESSMENT ORDER PASSED BY THE AO TO BE ERRONEOUS AND PREJUDICIAL TO THE INTEREST OF THE REVENUE, IN SO FAR AS, THE ISSUE OF SHARE CAPITAL HAS NOT BEEN LOOKED INTO OR INVESTIGATED BY THE AO. THUS IT IS IN THE PROCEE DINGS IN CONSEQUENCE TO THE 263 ORDER THAT THE PROVISO TO SECTION 68 WOULD BE MORE APPLICABLE. IN THE CIRCUMSTANCES ISSUE NO.3 IS HELD AGAINST THE ASSESSEE. 17. IN RESPECT OF THE 4 TH ISSUE AS TO WHETHER THE LD. CIT IN EXERCISE OF POW ER U/S 263 CAN GIVE DIRECTION IN RESPECT OF SUBSEQUENT ASSESSM ENT FOR WHICH REVISIONARY POWER U/S 263 HAS NOT BEEN EXERCISED, IT WAS SUBMITTED BY THE LD. AR THAT THE LD. CIT HAS GIVEN THREE DIRECTIONS. THE FIRST ONE TO VERIFY THE ISSUE OF SHARE CAPITAL INTRODUCTION, THE SECOND TO VERIFY THE CHANGE OF OWNERSHIP OF THE COMPANY AND THE THIRD TO VERIFY THE ISSUE OF CONVERSION OF THE INVESTMENTS AFTER TH E CHANGE OF MANAGEMENT. IT WAS THE SUBMISSION THAT ALL THE THREE ISSUES DO NOT RELATE TO THE SAME ASSESSMENT YEAR. ON A SPECIFIC QUERY FROM THE BENCH AS TO WHICH ASSESSMEN T YEARS EACH OF THE ISSUE RELATE TO, THE LD. AR WAS UNABLE TO SPECIFY. IT WAS THE SUBMIS SION THAT ALL THE THREE ISSUES CAN NEVER TAKE PLACE IN THE SAME ASSESSMENT YEAR. IN RE PLY THE LD. DR SUBMITTED THAT THE ISSUE WAS SQUARELY COVERED BY THE DECISION OF THE COORDINATE BENCH OF THIS TRIBUNAL IN THE CASE OF BISHAKA SALES PVT. LTD. VS CIT,KOL-I I, KOLKATA IN ITA NO.1493/KOL/2013 DATED 19.09.2014. IT WAS THE SUBMI SSION THAT THE LD. CIT HAS ONLY DIRECTED TO VERIFY FOR THE RELEVANT ASSESSMENT YEAR AND THERE IS NO SPECIFIC DIRECTION TO VERIFY FOR ANY SUBSEQUENT ASSESSMENT YEAR. ITA.NO.1410/K/2013 RIDHI SIDHI V INCOM(P).LTD. A.YR.2008-09 24 18. WE HAVE CONSIDERED THE RIVAL SUBMISSIONS. A PER USAL OF THE ORDER OF THE LD. CIT SHOWS THAT THE LD. CIT AFTER VERIFYING THE RECORDS AS AVAILABLE HAVE ISSUED THE SHOW CAUSE NOTICE AND AFTER CONSIDERING THE REPLY OF THE ASSESSEE HAD DONE FURTHER INVESTIGATION AND AS THE INFORMATION WAS NOT FULLY COMING FROM THE ASSESSEE HAD DIRECTED THE AO TO VERIFY WHETHER THESE THREE ISSUE S RELATE TO THE SAME ASSESSMENT YEAR. IN THE ORDER PASSED U/S 263 THE LD. CIT HAS N OT IN ANY CASE EXTENDED HIS JURISDICTION U/S 263 TO ANY OTHER ASSESSMENT YEAR. THERE IS NO DIRECTION IN THE ORDER OF THE LD.CIT DIRECTING THE AO TO CONSIDER ANYTHING FO R ANY OTHER ASSESSMENT YEAR. THE DIRECTION OF THE LD. CIT IS SPECIFIC. NOW IT IS FOR THE ASSESSEE TO SHOW AS TO WHICH YEAR THE ISSUES RAISED BY THE LD. CIT WOULD RELATE TO. I T IS ONLY IN THE KNOWLEDGE OF THE ASSESSEE AS TO WHAT THE ASSESSEE HAS DONE IN HIS BO OKS. WHAT HAS HAPPENED IN THE ASSESSEES BOOKS CANNOT BE WITHIN THE KNOWLEDGE OF THE LD. CIT. IN THE CIRCUMSTANCES AS IT IS NOTICED THAT THE LD. CIT HAS INVOKED REVIS IONARY POWERS FOR THE RELEVANT ASSESSMENT YEAR AND HAS NOT GIVEN ANY DIRECTION IN RESPECT OF ANY SUBSEQUENT ASSESSMENT YEAR, WE ARE OF THE VIEW THAT THIS ISSUE AS RAISED BY THE ASSESSEE DOES NOT HAVE LEGS TO STAND ON. CONSEQUENTLY ISSUE NO.4 STAN DS REJECTED. 19. COMING TO THE ISSUE NO.5 AS TO WHETHER ORDER PA SSED BY THE AO CAN BE SAID TO BE ERRONEOUS AND PREJUDICIAL TO THE INTEREST OF THE REVENUE WHEN THE AO HAS PASSED THE ORDER AFTER INQUIRY OR INVESTIGATION ON THE ISSUE O F SHARE CAPITAL. CLEARLY THIS ISSUE IS CONTRADICTORY TO THE ISSUE NO.2 AND 3 AS RAISED BY THE ASSESSEE. THE FACT THAT THE AO HAS NOT TAKEN THE ISSUE OF THE SHARE CAPITAL TO ITS LOGICAL CONCLUSION IS EVIDENT. THAT THE WHOLE REOPENING ITSELF WAS BY DESIGN OF THE ASSESSE E IS ALSO EVIDENT. NOW TO TAKE SHELTER UNDER SUCH DESIGN AND CLAIM THAT INVESTIGAT ION AND INQUIRY HAS BEEN DONE BY THE AO WHEN THE FACTS CLEARLY STAND AGAINST SUCH CL AIM IS ALSO EVIDENT. IN ANY CASE IN REGARD TO THE ISSUES OF THE SHOW CAUSE NOTICE U/S 2 63 IN SUCH CASES THE ISSUE HAS BEEN DECIDED BY THE HONBLE JURISDICTIONAL HIGH COURT I N A WRIT PETITION IN THE CASE OF ZIGMA COMMODITIES PRIVATE LIMITED IN W.P NO. 281 OF 2014 DT. 08/05/2014 WHEREIN THE HONBLE JURISDICTIONAL HIGH COURT HAS C ATEGORICALLY GIVEN A FINDING THAT THE LD. CIT HAS VERIFIED AND HAS FOUND THAT THE INV ESTIGATION WAS NOT DONE. THIS ORDER OF THE HONBLE JURISDICTIONAL HIGH COURT IN A WRIT PETITION WAS THE SUBJECT MATTER AND ITA.NO.1410/K/2013 RIDHI SIDHI V INCOM(P).LTD. A.YR.2008-09 25 WRIT APPEAL BEFORE THE HONBLE JURISDICTIONAL HIGH COURT IN GA NO.1911 OF 2014 DT.19/08/2014 WHEREIN THE HONBLE HIGH COURT HAS UP HELD THE ISSUE OF SHOW CAUSE NOTICE AND AGAIN IN AN ORBITER DICTA HAS PRACTICALL Y UPHELD THE ORDERS PASSED U/S 263. THUS CLEARLY RECOGNIZING THE DESIGN OF THE ASSESSEE IN RESPECT OF RE-ASSESSMENTS. IN THE CIRCUMSTANCES THIS ISSUE WOULD HAVE TO BE HELD AGAI NST THE ASSESSEE RESPECTFULLY FOLLOWING THE DECISION OF THE HONBLE JURISDICTIONA L HIGH COURT IN THE CASE OF WRIT APPEAL FILED IN THE CASE OF ZIGMA COMMODITIES PRIVA TE LIMITED. AS ALSO THE DECISION OF THE COORDINATE BENCH OF THIS TRIBUNAL IN THE CAS E OF BISHAKA SALES PVT LTD REFERRED TO SUPRA. ISSUE NO.5 IS HELD AGAINST THE ASSESSEE. 20. COMING TO THE 6 TH ISSUE AS TO WHETHER THE LD. CIT IS CORRECT IN HOLD ING THE ORDER PASSED BY THE AO IS ERRONEOUS ON THE BASIS OF A GEN ERALIZED BACKGROUND IN THE ABSENCE OF SPECIFIC MATERIAL AGAINST THE ASSESSEE. AGAIN TH IS ISSUE IS SQUARELY COVERED BY OUR FINDING IN RESPECT OF ISSUE NO.5 AND THE SAME STAND S REJECTED. 21. ISSUE NO.7 AS TO WHETHER THE LD. CIT OUGHT TO H AVE MADE INQUIRIES HIMSELF BEFORE COMING TO THE CONCLUSION THAT THE ORDER OF T HE AO ERRONEOUS AND PREJUDICIAL TO THE INTEREST OF REVENUE IS ALSO COVERED BY OUR FIND INGS IN RESPECT OF THE 5 TH ISSUE AND CONSEQUENTLY THIS ISSUE ALSO STANDS REJECTED. 22. IN THE COURSE OF THE ARGUMENTS THE LD. AR HAD A LSO MADE A SPECIFIC PRAYER THAT THE ISSUE OF THE SHARE PREMIUM WHICH HAS BEEN DECID ED IN THE CASE OF BISAKHA SALES PVT. LTD. VS CIT, KOL-II, KOLKATA VIDE ITA NO.1493/ KOL/2013 DATED 19.09.2014 NEEDS TO BE RE-VISITED, IN SO FAR AS THE SHARE PREMIUM CA NNOT BE TREATED AS INCOME OF THE ASSESSEE. RESPECTING THE SENTIMENTS AND THE FEARS E XPRESSED BY THE LD. AR WE HAVE REVISITED THE DECISION OF THE CO-ORDINATE BENCH OF THIS TRIBUNAL IN THE CASE OF BISAKHA SALES PVT. LTD. HERE IT IS SPECIFICALLY CLARIFIED T HAT IN NONE OF THE CASES RELATEING TO THE 263 ORDERS IN RESPECT OF THE SHARE APPLICATION/ PRE MIUM CASES INCLUDING THE DECISION IN THE CASE OF BISAKHA SALES PVT. LTD. HAS THE TRIBU NAL GIVEN ANY FINDING AS TO WHAT IS TO BE ASSESSED AND WHAT IS NOT TO BE ASSESSED IN RESPE CT OF 263 ORDERS PASSED BY THE LD. CITS IN THESE GROUPS OF CASES ALL THAT THE TRIBUNAL HAS DONE IS TO GIVE ITS FINDING WHETHER THE ORDER OF THE LD. CITS PASSED ORDER U/S 263 ARE SUSTAINABLE ON THE FACTS OF ITA.NO.1410/K/2013 RIDHI SIDHI V INCOM(P).LTD. A.YR.2008-09 26 THE CASES OR NOT. THE DISCUSSIONS IN THE ORDERS OF THE TRIBUNAL ARE ONLY THE JUSTIFICATIONS AND THE REASONING FOR UPHOLDING THE ORDERS PASSED U/S 263 BY THE LD. CIT ON THE FACTS OF THE CASES. THUS IT IS NOTICED THAT THE FEAR EXPRESSED BY THE LD. AR THAT THE SHARE PREMIUM WOULD BE LIABLE TO BE TREATED AS INCOME IN THE HANDS OF THE ASSESSES ARE UNFOUNDED. IF THE ASSESSEE IS ABLE TO SUBSTANTI ATE ITS CASE THAT THESE WERE ACTUALLY SHARE PREMIUMS THEN OBVIOUSLY SUCH SHARE PREMIUMS I F HAVING BEEN COLLECTED AFTER DUE COMPLIANCE OF THE LAWS PRESCRIBED WOULD NOT BEC OME INCOME IN THE HANDS OF THE ASSESSEE IF NOT ADMITTEDLY IT WILL HAVE TO BE ASSES SED AS INCOME FROM OTHER SOURCES. COMING TO THE ISSUE THAT THE ASSESSEE HAD NO BUSINE SS ACTIVITY AND CONSEQUENTLY NO UNDISCLOSED INCOME CAN BE ASSESSED IN THE HANDS OF THE ASSESSEE. WE MUST MENTION HERE THAT IT IS NOT THE BUSINESS INCOME WHICH IS BE ING CONSIDERED IT IS THE CREDIT IN THE BOOKS OF ACCOUNTS OF THE ASSESSEE WHICH HAS BEEN QU ESTIONED U/S 68 OF THE ACT. IT IS FOR THE ASSESSEE TO EXPLAIN THE ENTRIES IN ITS BOOKS AN D AS EARLIER MENTIONED IF IT RELATES TO THE SHARE CAPITAL THEN IN VIEW OF THE PROVISO TO TH E PROVISION OF SECTION 68 OF THE ACT WHICH IS APPLICABLE PROSPECTIVE IN NATURE ON THE PR OCEDURAL LEVEL WOULD ALSO HAVE TO BE COMPLIED WITH. IN THESE CIRCUMSTANCES WE ARE OF THE VIEW THAT ORDER PASSED U/S 263 IS SUSTAINABLE ON THE FACTS OF THE PRESENT CASE AND CONSEQUENTLY STANDS SUSTAINED. 23. IN THE RESULT THE APPEAL OF THE ASSESSEE STANDS DISMISSED. ORDER PRONOUNCED IN THE COURT ON 10/10/2014. SD/- SD/- [SHAMIM YAHYA] [ GEORGE MATHAN ] ACCOUNTANT MEMBER JUDICIAL MEMBER DATE: 10/10/2014. R.G.(.P.S.) COPY OF THE ORDER FORWARDED TO: 1. RIDHI SIDHI VINCOM (P)LTD., 11, SAMBHU CHATTERJEE S TREET, KOLKATA-700007. 2 C.I.T.,-III-KOLKATA. 3 . CIT(A)DR, KOLKATA BENCHES, KOLKATA TRUE COPY, BY ORDER, DEPUTY /ASST. REGISTRAR , ITAT, KOLKATA BENCHES ITA.NO.1410/K/2013 RIDHI SIDHI V INCOM(P).LTD. A.YR.2008-09 27