M/s Venkatesh Technokraft Pvt. Ltd., Ludhiana V. ITO, W-1(5), Ludhiana

ITA 1464/CHANDI/2018

• Counselvise Citation: [2021] 108 COUNSELVISE.COM (IT) 6122 (ITAT-CHANDIGARH)
• Duration Of Justice: 2 year(s) 4 month(s) 22 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 19-04-2021
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: B
• Next Hearing Date: 10-02-2021
• Assessment Year: 2014-2015
• Appeal Filed On: 28-11-2018
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: SANDIP DAHIYA CIT
• Keywords: Share purchase agreement; Source of fund; Fair market value; Valuation report; Assessment record; Revenue expenditure; TDS; Set aside
• Section: 143(3); 142(1); 133(6); 143(1); 274; 113; 43; 13; 22; 131; 263

Judgement Text

, , IN THE INCOME TAX APPELLATE TRIBUNAL, CHANDIGARH BE NCH B, CHANDIGARH (VIRTUAL COURT) .., ! '# .. , $ %& BEFORE: SHRI. N.K.SAINI, VP & SHRI , R.L. NEGI, JM ITA NO. 1464/CHD/2018 ASSESSMENT YEAR : 2014-15 M/S VENKATESH TECHNOKRAFT PVT. LTD. C/O SH. TEJMOHAN SINGH, ADVOCATE # 527,SECTOR 10-D,CHANDIGARH THE ITO, W-1(5), LUDHIANA, PUNJAB PAN NO: AABCV9215G APPELLANT RESPONDENT !' ASSESSEE BY : SHRI TEJMOHAN SINGH, ADVOCATE #!' REVENUE BY : SHRI SANDIP DAHIYA, CIT $ %! & DATE OF HEARING : 10/02/2021 '()*! & DATE OF PRONOUNCEMENT : 19/04/2021 %'/ ORDER PER N.K. SAINI, VICE PRESIDENT THIS IS AN APPEAL BY THE ASSESSEE AGAINST THE ORDER DT. 27/09/2018 OF LD. PR. CIT-1, LUDHIANA. 2. FOLLOWING GROUNDS HAVE BEEN RAISED IN THIS APPEA L: 1. THAT THE LD. COMMISSIONER OF INCOME TAX HAS WRONGLY ASSUMED JURISDICTION UNDER SECTION 263 OF THE ACT TO SET-ASIDE THE ASSES SMENT ORDER DATED 27.12.2016 PASSED BY THE ASSESSING OFFICER IN AS MUCH AS THE ORDER IS NEITHER ERRONEOUS NOR PREJUDICIAL TO THE INTEREST OF REVENUE AND AS S UCH THE ASSUMPTION OF JURISDICTION UNDER SECTION 263 OF THE ACT IS BEYOND HIS COMPETENCE. 2. THAT THE LD. COMMISSIONER OF INCOME TAX HAS ERRED I N FAILING TO CONSIDER THE VARIOUS REPLIES AND SUBMISSIONS PLACED ON RECOR D IN PROCEEDINGS BEFORE HIM WHICH IS ARBITRARY AND UNJUSTIFIED. 3. THAT THE ASSESSMENT ORDER HAVING BEEN PASSED BY THE ASSESSING OFFICER AFTER DUE APPLICATION OF MIND AND TAKING INTO CONSI DERATION THE VARIOUS REPLIES, MATERIAL ON RECORD AND BOOKS OF ACCOUNT, THE ACTION RESORTED TO BY THE COMMISSIONER OF INCOME TAX IS UNWARRANTED AND UNCAL LED FOR. 2 4. THAT THE ORDER OF COMMISSIONER OF INCOME TAX IS ERR ONEOUS, ARBITRARY, OPPOSED TO THE FACTS OF THE CASE AND IS UNSUSTAINAB LE IN LAW. FROM THE AFORESAID GROUNDS IT IS GATHERED THAT ONLY GRIEVANCE OF THE ASSESSEE RELATES TO THE JURISDICTION OF THE LD. PR. CIT ASSUMED UNDER SECTION 263 OF THE INCOME TAX ACT, 1961 (HEREINAFTER REFERRED TO A S ACT). 3. FACTS OF THE CASE IN BRIEF ARE THAT THE ASSESSEE FILED ITS RETURN OF INCOME ON 04/09/2014 DECLARING AN INCOME OF RS. 19,52,040/- W HICH WAS PROCESSED UNDER SECTION 143(1) OF THE ACT, LATER ON THE CASE WAS SE LECTED FOR SCRUTINY. THE A.O. ASSESSED THE INCOME WHICH WAS RETURNED BY THE ASSES SEE BY OBSERVING IN PARA 2 & 3 OF THE ASSESSMENT ORDER DT. 27/12/2016 AS UNDER : 2. IN RESPONSE TO SAID NOTICES SH.RAVINDER SINGH KH ERA, CHARTERED ACCOUNTANT, AUTHORISED REPRESENTATIVE OF THE ASSESS EE, ATTENDED THE ASSESSMENT PROCEEDINGS FROM TIME TO TIME WITH WHOM THE CASE WA S DISCUSSED. DURING THE COURSE OF ASSESSMENT PROCEEDINGS, AUDIT REPORT ALON G WITH TRADING ACCOUNT/ PROFIT & LOSS ACCOUNT, BALANCE SHEET ETC WAS FILED. THE INFORMATION REQUISITIONED AS PER QUESTIONNAIRE WAS FURNISHED, PLACED ON RECOR D AND EXAMINED. BOOKS OF ACCOUNT WERE PRODUCED. THE ASSESSEE DERIVES INCOME FROM BUSINESS OF WHOLESALE TRADING OF CUTTING TOOLS. 3. THE DETAILS FILED WERE DULY EXAMINED AND THE CAS E WAS DISCUSSED WITH THE AUTHORIZED REPRESENTATIVE OF THE ASSESSEE. AFTER EX AMINATION, THE CASE IS ASSESSED AT RETURNED INCOME RS. 19, 52,040/-. 4. THE LD. PR. CIT THEREAFTER EXERCISED HIS REVISIO NARY POWER UNDER SECTION 263 OF THE ACT AND OBSERVED THAT PROPER AND SUFFICIENT ENQUIRIES HAD NOT BEEN MADE BY THE A.O. WHICH RENDERED THE ASSESSMENT ORDE R ERRONEOUS IN SO FAR AS IT IS PREJUDICIAL TO THE INTEREST OF THE REVENUE. LD. PR. CIT OBSERVED AS UNDER: SHARE ISSUED AT PREMIUM BY THE ASSESSEE : A PERUSAL OF ASSESSMENT RECORD OF THE YEAR UNDER CON SIDERATION REVEALS THAT THE ASSESSEE HAD ISSUED SHARES AT PREMIUM TO THE SHAREH OLDERS AS DETAILED BELOW:- NAME OF SH AREHOLDERS SHARES FACE VALUE OF SHARES (RS.) SHARE PREMIUM (RS.) TOTAL VALUE (RS.) DAISY SUPPLIERS (P) LTD. 40,000 4,00,000/ - 6,00,000/ - 10,00,000/ - ZINNIA SALES (P) LTD. 40,000 4,00,000/ - 6,00,000/ - 10,00,000/ - SUNFLAME DISTRIBUTORS (P) 20,000 2,00,000/ - 3,00,000/ - 5,00,000/ - 3 LTD. PANSY DEALER (P) LTD. 40,000 4,00,000/ - 6,00,000/ - 10,00,000/ - VIRAT COMMOSALE (P) LTD. 20,000 2,00,000/ - 3,00,000/ - 5,00,000/ - NILAY DISTRIBUTORS (P) LTD. 40,000 4,00,000/ - 6,00,000/ - 10,00,000/ - TOTAL 2,00,0 00 20,00,000/ - 30,00,000/ - 50,00,000/ - ASSESSEE HAS SUBMITTED ONLY PART INFORMATION/DOCUME NTS TO THE AO, WHO ACCEPTED THE SAME AS PER ASSESSMENT ORDER DATED 27. 12.2016. A PERUSAL OF ASSESSMENT RECORDS SHOWS THAT THE ASSESSEE COULD NO T PRODUCE THE COMPLETE INFORMATION AS REQUIRED BY THE AO AND ALSO COULD NOT PRODUCE THE DIRECTORS OF THE INVESTOR COMPANIES. SO THE GENUINENESS OF THE T RANSACTIONS WAS NOT ESTABLISHED. THE AO DID NOT CARRY OUT PROPER INVESTI GATION/ENQUIRIES REGARDING RECEIPT OF THESE SHARE PREMIUM WITH RESPECT TO IDEN TITY, CREDITWORTHINESS AND GENUINENESS OF TRANSACTION OF SHARE PREMIUM RECEIPT . 4.1 LD. PR. CIT ASKED THE ASSESSEE TO SHOW CAUSE AS TO WHY THE AFORESAID ASSESSMENT ORDER DT. 27/12/2016 PASSED UNDER SECTIO N 143(3) OF THE ACT FOR THE A.Y. 2014-15 SHOULD NOT BE REVISED / MODIFIED/ENHAN CED OR SET ASIDE WITH A DIRECTION TO MAKE THE ASSESSMENT DENOVO. 4.2 IN RESPONSE, THE ASSESSEE SUBMITTED AS UNDER: THAT DURING ASSESSMENT PROCEEDINGS, THE A.O. HAD REQ UIRED THE ASSESSEE TO JUSTIFY THE ISSUE OF SHARES AT A PREMIUM UNDER RULE 11UA OF THE I T RULES, 1962. THE ASSESSEE HAD SUBMITTED DETAILS OF TURNOVER, ASSESSA BLE INCOME, TAX PAID FROM A.Y.S 2011-12 TO 2015-16, AND THE INVESTOR COMPANIE S BEING IMPRESSED AND SATISFIED BY THE COMPANY'S PERFORMANCE AND SAFE INV ESTMENT OF THEIR FUNDS HAD PURCHASED SHARES OF THE ASSESSEE COMPANY AT A PREMI UM OF RS. 15/- PER SHARE. THE ASSESSEE HAD ACCUMULATED RESERVES AND SURPLUSES OF RS. 142.84 LACS AGAINST PAID UP CAPITAL OF RS. 103.12 LACS, THUS APPARENTLY THERE WAS ACCUMULATED PROFIT OF RS.15/- PER SHARE AGAINST PAID UP CAPITAL OF RS. 10/- PER SHARE. REQUIREMENTS OF RULE 11UA WERE FULLY COMPLIED WITH WHICH CAN BE VER IFIED FROM THE COMPANY'S AUDITED BALANCE SHEETS WHICH WERE FILED DURING ASSE SSMENT PROCEEDINGS. THE AO HAD ACCEPTED THE FAIR MARKET VALUE OF RS.25/- PER S HARE OF FACE VALUE OF RS. 10/- EACH AS PER RULE 11UA OF THE I T RULES. THAT ALL DOCUMENTS REQUIRED BY THE A.O. WERE FILED D URING ASSESSMENT PROCEEDINGS. COPIES OF WRITTEN SUBMISSIONS FILED DU RING ASSESSMENT PROCEEDINGS WERE ENCLOSED. THAT THE DOCUMENTS FILED BEFORE THE A.O, INCLUDED DOCUMENTS FILED BY THE INVESTMENT COMPANIES ALSO TO EACH OF W HOM THE A.O. HAD SPECIFICALLY ISSUED REGISTERED LETTERS U/S 133(6) O F THE I T ACT, 1961. AS REGARDS NON- PRODUCTION OF DIRECTORS OF THE INVESTOR COMPANIES, THE AO HAD REQUIRED THE ASSESSEE TO DO SO ONLY VIDE LETTER DATED 08/12/2016 , RECEIVED BY THE ASSESSEE ON 10/12/2016 FOR PRODUCING THE DIRECTORS ON 14/12/201 6, WHICH WAS NOT POSSIBLE DUE TO THE SHORT NOTICE. REPLY HAD BEEN SUBMITTED THAT SINCE THESE COMPANIES ARE BASED IN CALCUTTA, 1000 KMS AWAY FROM LUDHIANA, BEC AUSE OF FINANCIAL DIFFICULTIES 4 FACED DUE TO DEMONETIZATION, THE ASSESSEE IS UNABLE TO PRODUCE THE DIRECTORS, HOWEVER THAT THE A.O. MAY ISSUE COMMISSION AS PER TH E PROVISIONS OF THE INCOME TAX ACT, 1961. AS REGARDS PROPER INVESTIGATION REGARDING RECEIPT O F SHARE PREMIUM WITH RESPECT OF IDENTITY, CREDITWORTHINESS AND GENUINENE SS, THAT THE A.O. HAD THOROUGHLY INVESTIGATED THIS ISSUE, LETTER U/S 133( 6) WERE ISSUED TO THE INVESTING COMPANIES, AND HAD COLLECTED INFORMATION, CONFIRMAT IONS, EXPLANATIONS AND DOCUMENTARY EVIDENCES WHICH WERE FILED BEFORE THE A O. THUS IT CANNOT BE SAID THAT NO PROPER ENQUIRIES WERE MADE BY THE A.O. FURTHER THAT DURING ASSESSMENT PROCEEDINGS, THE ASSESSEE HAD PRODUCE COMPLETE BOOKS OF ACCOUNTS, ORIGINAL VOUCHE RS AND OTHER RECORDS BEFORE THE A.O. IT WAS ALSO SUBMITTED THAT WHEN THE AO TAKES ONE OF THE TWO VIEWS PERMISSIBLE IN LAW, AND THE CIT DOES NOT AGREE WITH SUCH VIEW, IT CANNOT BE TREATED AS ERRONEOUS AND PREJUDICIAL TO THE INTERES T OF REVENUE. THAT THE ASSESSMENT ORDER HAS TO BE BOTH ERRONEOUS AND PREJU DICIAL TO THE INTEREST OF REVENUE, FOR RECOURSE U/S 263(1). 4.3 LD. PR. CIT OBSERVED THAT THE A.O. ASKED THE AS SESSEE TO PRODUCE THE DIRECTORS OF THE INVESTOR COMPANIES. THE ASSESSEE R EITERATED THE SUBMISSIONS WHICH WERE MADE EARLIER AND ALSO FURNISHED THE DOCU MENTARY EVIDENCES REGARDING SOURCE OF SOURCE OF THE DEPOSITS IN BANKS OF THE INVESTING COMPANIES FROM WHERE FUNDS WERE TRANSFERRED TO THE ASSESSEES BANK ACCOUNT THROUGH BANKING CHANNELS ONLY. IT WAS STATED THAT THE SAME WERE ALSO PRODUCED BEFORE THE A.O. IT WAS FURTHER STATED THAT SINCE ALL THE I NVESTING COMPANY AND THEIR RESPECTIVE DIRECTORS WERE BASED IN CALCUTTA THEREFO RE THE COMMISSION MAY BE ISSUED IN ACCORDANCE WITH THE PROVISIONS OF LAW TO PROCURE WHATEVER FURTHER INFORMATION IS REQUIRED. 4.4 THE LD. PR. CIT AFTER CONSIDERING THE SUBMISSIO NS OF THE ASSESSEE OBSERVED THAT THE ASSESSEE DURING THE COURSE OF ASSESSMENT P ROCEEDINGS FURNISHED THE COMPUTATION OF THE ISSUE OF SHARE AT A PREMIUM UNDE R RULE 11UA OF THE INCOME TAX RULES, 1962 AND FURNISHED THE DETAILS OF TURNOV ER, ASSESSABLE INCOME, TAX PAID FROM A.Y. 2011-12 TO 2015-16 AND ALSO FURNISHE D THE CONFIRMATION SIGNED BY THE INVESTING COMPANIES. THE LD. PR. CIT ALSO POINT ED OUT THAT ALL THE SO CALLED INVESTORS HAVE PAN, COPIES OF BANK ACCOUNTS ALONGWI TH BALANCE SHEETS WERE 5 ALSO FILED. THE PR. CIT ADMITTED THAT THE FUNDS WER E TRANSFERRED THROUGH RTGS FROM RESPECTIVE BANK ACCOUNTS. HOWEVER THESE INVESTING C OMPANIES WERE NOT PRODUCED BEFORE THE A.O. EVEN THOUGH SPECIFICALLY C ALLED UPON, BY STATING THAT IT WAS NOT POSSIBLE TO DO SO DUE TO SHORT NOTICE AS THEY WERE FROM KOLKATA. 4.5 IT WAS STATED BEFORE THE LD. CIT(A) THAT THE IN VESTOR COMPANIES BEING IMPRESSED AND SATISFIED BY THE COMPANYS PERFORMANC E AND SAFE INVESTMENT OF THEIR FUNDS, HAD PURCHASED SHARES OF THE ASSESSEE C OMPANY AT A PREMIUM OF RS. 15/- PER SHARE. THE LD. COUNSEL FOR THE ASSESSEE FU RNISHED THE DOCUMENTS RECEIVED BY THE ASSESSEE, IN RESPONSE TO THE NOTICE S ISSUED UNDER SECTION 133(6) OF THE ACT TO SIX COMPANIES. IN THOSE REPLIES, IT WAS STATED THAT THEIR DIRECTO RS CAME INTO CONTACT WITH SHRI LOKESH KUMAR, DIRECTOR OF THE ASSESSEE COMPANY SOMEWHERE IN THE BEGINNING OF FINANCIAL YEAR 2013-14 AND MR. LOKESH KUMAR EXPRESSED HIS WILLINGNESS TO SELL EQUITY SHARES OF THE ASSESSEE C OMPANY, SINCE HE WAS IN NEED OF LONG TERM FUNDS, AFTER SUCH DISCUSSION, EXCHANGE OF FINANCIAL DOCUMENTS / DATA AND AFTER NEGOTIATION OF THE RATE OF THE SHARE S, THE DEAL WAS FINALIZED. 4.6 HOWEVER, THE LD. PR. CIT WAS OF THE VIEW THAT T HE A.O. MERELY OBTAINED THE CONFIRMATION FROM THE ASSESSEE AND ACCEPTED THE SAM E WITHOUT CONDUCTING ENQUIRY INTO THE IDENTITY OF THE INVESTOR OR GENUIN ENESS OF THE TRANSACTION. THE LD. PR. CIT OBSERVED THAT THE COMPANIES DID NOT RESPOND TO THE LETTERS OF THE A.O. BUT THE ASSESSEE FURNISHED DETAILS WHICH WERE CALLE D FROM THOSE INVESTING COMPANIES WHICH COULD NOT BE SAID TO BE THE INDEPEN DENT VERIFICATION. HE ALSO OBSERVED THAT EXISTENCE OF THE FOUR COMPANIES VIS M /S ZINNIA SALES(P) LTD., M/S DAISY SUPPLIERS(P) LTD., M/S PANSY DEALERS(P) LTD. AND M/S NILAY DISTRIBUTORS (P) LTD. COULD NOT BE ESTABLISHED AS NONE OF THOSE WERE FOUND AT THE ADDRESSES GIVEN BY THE ASSESSEE, THEREFORE THE CONTENTION OF THE ASSESSEE THAT THE SERVICE OF LETTER / SUMMONS WAS A PROOF THAT THE INVESTOR C OMPANY EXISTED AT GIVEN ADDRESS WAS FAR FROM REALITY. THEREFORE THE EXISTEN CE OF THE INVESTOR COMPANIES 6 WAS NOT PROVED. LD. PR. CIT ALSO POINTED OUT THAT T HOSE COMPANIES HAD COMMON SET OF AUTHORIZED SIGNATORY / DIRECTORS WHO HAD SIG NED THE BALANCE SHEET AND SOME HAD THE SAME ADDRESS OF KOLKATA. 4.7 LD. PR. CIT ALSO DISCUSSED THE OBSERVATIONS MAD E IN THE ASSESSMENT ORDER OF M/S GOBINDA TECHNOLOGIES PRIVATE LTD. PAN AAOCS0684 D WHEREIN IT WAS OBSERVED THAT THE IDENTITY OF THE SIX INVESTOR COMP ANIES HAD BEEN PROVED ONLY ON PAPER. LD. PR. CIT WAS OF THE VIEW THAT THE A.O. FAILED TO MAKE PROPER AND SUFFICIENT ENQUIRY AND NONE OF THE INGREDIENT REQUI RED TO BE LOOKED INTO VIS IDENTITY, CREDIT WORTHINESS AND GENUINENESS OF THE TRANSACTION HAD BEEN EXAMINED BY THE A.O. ONLY A SUPERFICIAL LOOK AT THE DOCUMENTS SUBMITTED BY THE ASSESSEE HAD BEEN MADE AND CONTENTION OF THE ASSESS EE HAD BEEN ACCEPTED WITHOUT ANY IN-DEPTH EXAMINATION. SUCH LAPSE HAD RE NDERED THE ASSESSMENT ORDER ERRONEOUS IN SO FAR AS IT WAS PREJUDICIAL TO THE INTEREST OF THE REVENUE. HE ALSO OBSERVED THAT NOT ONLY NO DISALLOWANCE / ADDI TION HAD BEEN MADE BY THE A.O. AND THAT THE ISSUE HAD NOT BEEN PROPERLY EXAMI NED AND INQUIRED INTO, THEREFORE, DETAILED AND DEEP INQUIRIES WERE REQUIRE D TO BE MADE ON THIS ISSUE BEFORE ACCEPTING THE CLAIM OF THE ASSESSEE. 4.8 LD. PR. CIT OBSERVED THAT THE ASSESSMENT RECORD REVEALED THAT REQUISITE ENQUIRY WERE NOT CONDUCTED REGARDING THE ISSUE AS T O WHAT PROMPTED THE SUBSCRIBERS TO THE SHARES TO PAY PREMIUM ON SHARES OF A LITTLE KNOWN COMPANY HAVING NO OR INSIGNIFICANT BUSINESS ACTIVITIES. THE REFORE THE ASSESSMENT ORDER WAS PASSED WITHOUT APPLICATION OF MIND, NO PROPER ENQUI RY WAS CONDUCTED REGARDING THE IDENTITY AND CREDITWORTHINESS OF THE SUBSCRIBERS AND NO PROPER ENQUIRY HAD BEEN MADE REGARDING THE GENUINENESS OF THE TRANSACTIONS. THE REFERENCE WAS MADE TO THE FOLLOWING CASE LAWS : JUDGMENT OF HIGH COURT OF CALCUTTA IN GA NO. 509 OF 2016 WITH ITAT NO. 113 OF 2016 IN RAJMANDIR ESTATES P LTD. VS. PCIT KOLKATA III, KOL KATA ORDER DT. 13/05/2016 SUMATI DAYAL VS. CIT (1995) 214 ITR 801 (SC) 7 CIT VS. ACTIVE TRADERS PVT. LTD. CIT VS. NOVA PROMOTERS AND FINLEASE (P) LTD. CIT VS. PRECISION FINANCE PVT. LTD. SLP (C) NO.S 23976/2017 IN DENIEL MERCHANTS PVT. LT D. & ANR. VS. ITO & ANR JAI COMMERCIAL CO. LTD. VS. JOINT CIT(2000) 66 TTJ (DEL-TRIB) 731 EXPRESS NEWSPAPERS (P) LTD. VS. CIT (2002) 255 ITR 137 (MAD) DESAI BROTHERS LTD. VS. DY. CIT (1998) 66 ITD 203 ( PUNE-TRIB) GEE VEE ENTERPRISES VS. ADDL. CIT & ORS. (1975) 99 I TR 375 (DEL) CIT VS. PUSHPA DEVI (1987) 164 ITR 639 (PAT) LAJJA WATI SINGHAL, SMT. VS CIT (1997) 226 ITR 527( ALL) P.K. FABRICS VS. ASSTT. CIT(1998) 67 ITD 326 (ASR-T RIB) V. NARAYANAN VS. DY. CIT (2004) 88 ITD 43 (CHENNAI TRIB) AMBIKA AGRO SUPPLIERS VS. ITO(2005) 95 ITD 326(PUNE TRIB) 4.9 LD. CIT(A) HELD THAT THE A.O. COMPLETED THE ASS ESSMENT WITHOUT MAKING PROPER ENQUIRY AND THAT NOT ONLY THE A.O. HAD NOT M ADE PROPER ENQUIRY AND HAD NOT VERIFIED THE CORRECTNESS AND GENUINENESS OF THE ASSESSEES EXPLANATION BUT HE HAD ALSO MADE THE ASSESSMENT ORDER WITHOUT P ROPER APPLICATION OF MIND AND WITHOUT PROPERLY APPRECIATING THE FACTS. THEREF ORE THE ORDER MADE WITHOUT APPLICATION OF MIND WAS ERRONEOUS AND PREJUDICIAL T O THE INTEREST OF THE REVENUE. THE RELIANCE WAS PLACED ON THE FOLLOWING C ASE LAWS: THERMAL SYSTEMS (HYD)(P) LTD. ASSTT. CIT (2006) 11 (1) ITCL 245 (DEL-HC); (2009) 312 ITR 187 (HYD-TRIB) PRAVIN NAVIN INVESTMENTS & TRADING CO. (P) LTD. ASS TT. CIT (2009) 27(II) ITCL 498 (MUM- TRIB); (2009) 29 SOT 284 (MUM-TRIB.) BOARD OF CONTROL FOR CRICKET IN INDIA VS. DIRECTOR OF INCOME TAX (EXEMPTION), (2006) 278 ITR(AT) 83 (MUM-TRIB); (2005) 96 ITD 263 (MUM-T RIB); THE LD. PR. CIT, ACCORDINGLY SET ASIDE THE ASSESSME NT ORDER PASSED BY THE A.O. AND DIRECTED HIM. TO MAKE FRESH ASSESSMENT DEN OVO AFTER PROPERLY 8 EXAMINING THE FACT OF THE CASE AND RELEVANT LEGAL P ROVISION AND CONDUCTING PROPER ENQUIRY AFTER AFFORDING THE OPPORTUNITY OF B EING HEARD TO THE ASSESSEE. 5. NOW THE ASSESSEE IS IN APPEAL. 6. LD. COUNSEL FOR THE ASSESSEE REITERATED THE SUBM ISSIONS MADE BEFORE THE AUTHORITIES BELOW AND FURTHER SUBMITTED THAT THE A. O. MADE THE PROPER ENQUIRIES AND RAISED THE SPECIFIC QUERIES RELATING TO THE SHA RE PREMIUM AND THE ASSESSEE REPLIED THE SAME, A REFERENCE WAS MADE TO PAGE NO. 1 & 2 OF THE ASSESSEES COMPILATION WHICH IS THE COPY OF THE REPLY DT. 08/1 1/2016, IN RESPONSE TO THE NOTICE DT. 18/10/2016 ISSUED BY THE A.O. 6.1 IT WAS FURTHER SUBMITTED THAT THE LD. PR. CIT I N PARA 2 OF THE IMPUGNED ORDER ALTHOUGH MENTIONED THAT PROPER AND SUFFICIENT ENQUIRY HAD NOT BEEN MADE WHICH LAPSES BEARS TO HAVE RENDERED THE ASSESS MENT ORDER ERRONEOUS IN SO FAR AS PREJUDICIAL TO THE INTEREST OF THE REVENU E, BUT HE HAS NOT MENTIONED THAT NO ENQUIRY WAS MADE BY THE A.O. SO, IT WAS NOT A CASE OF LACK OF ENQUIRY, THEREFORE, THE LD. PR CIT WAS NOT JUSTIFIED IN EXER CISING HIS POWERS UNDER SECTION 263 OF THE ACT. 6.2 IT WAS STATED THAT THE LD. PR. CIT AT PAGE NO. 2 OF THE IMPUGNED ORDER REFERRED THAT THE ASSESSEE COULD NOT PRODUCE THE DI RECTOR OF INVESTOR COMPANIES, ON THAT GROUND ALSO THE ADDITION COULD N OT HAVE BEEN MADE. IT WAS SUBMITTED THAT THE A.O. REQUIRED THE ASSESSEE T O JUSTIFY THE ISSUANCE OF SHARE AT A PREMIUM OF RS. 15 PER SHARES. THE SAID PREMIUM WAS WORKED OUT ON THE BASIS OF VALUATION OF THE SHARES (COPY OF WHICH IS PLACED AT PAGE NOS. 476 & 477 OF THE ASSESSEES PAPER BOOK). IT WAS ACCORDINGLY S UBMITTED THAT THE A.O. ON VERIFYING THE VALUATION REPORT OF THE SHARES ACCEPT ED THE FAIR MARKET VALUE AT RS. 25 PER SHARE HAVING FACE VALUE OF RS. 10 EACH. 6.3 LD. COUNSEL FOR THE ASSESSEE REFERRED TO PARA N O. 5.1 OF THE IMPUGNED ORDER AND SUBMITTED THAT VIDE LETTER DT. 19/12/2016 , ALL THE DOCUMENTS WHICH 9 WERE ASKED BY THE A.O. TO BE PRODUCED, WERE FURNISH ED BY THE ASSESSEE. AS REGARDS TO THE NON PRODUCTION OF THE DIRECTORS, IT WAS STATED THAT THE ASSESSEE REQUESTED THE A.O. TO SUMMON THE DIRECTORS, REFEREN CE WAS MADE TO PAGE NO. 498 AND 499 OF THE ASSESSEES PAPER BOOK. 6.4 IT WAS STATED THAT ALL THE INVESTING COMPANIES FURNISHED THEIR REPLIES TO THE A.O., REFERENCE WAS MADE TO PAGE NO. 283 TO 370 WHI CH ARE THE COPIES OF THE CONFIRMATORY LETTERS RECEIVED FROM THE INVESTING CO MPANIES ALONG WITH SUPPORTING DOCUMENTS. IT WAS ACCORDINGLY SUBMITTED THAT THE ASSESSEE FURNISHED ALL THE DETAILS BEFORE THE A.O. WHO EXAMINED THE SA ME AND ACCEPTED AFTER PROPER VERIFICATION, THEREFORE THE LD. PR. CIT WAS NOT JUSTIFIED IN HOLDING THAT THE ASSESSMENT ORDER PASSED BY THE A.O. WAS ERRONEOUS O R PREJUDICIAL TO THE INTEREST OF THE REVENUE. 6.5 IT WAS CONTENDED THAT AN IDENTICAL ISSUE HAS BE EN DECIDED BY THE ITAT CHANDIGARH BENCH B CHANDIGARH IN THE CASE OF M/S TECHNICO METALS PVT. LTD. VS. DCIT IN ITA NO. 1348/CHD/2017 FOR THE A.Y. 2012 -13 VIDE ORDER DT. 15/02/2019 WHEREIN ONE OF THE COMPANIES WHICH MADE THE INVESTM ENT IN THE ASSESSEE COMPANY WAS INVOLVED AND THE ISSUE WAS DECIDED IN F AVOUR OF THE ASSESSEE, A REFERENCE WAS ALSO MADE TO PAGE NO. 57 TO 78 OF THE ASSESSEES PAPER BOOK WHICH IS THE COPY OF THE SAID DECISION. IT WAS STAT ED THAT THE LD. PR. CIT, ONLY ON THE BASIS OF SUSPICION, WAS NOT JUSTIFIED TO DIRECT THE A.O. FOR MAKING FURTHER ENQUIRIES. IT WAS FURTHER SUBMITTED THAT THE FACTS OF THE CASES RELIED BY THE LD. PR. CIT WERE DIFFERENT FROM THE FACTS OF THE ASSESSEES CASE. 6.6 LD. COUNSEL FOR THE ASSESSEE SUBMITTED THAT IF AT ALL THE LD. PR. CIT WAS NOT SATISFIED FROM THE ENQUIRY MADE BY THE A.O. HE COUL D HAVE MADE THE ENQUIRY HIMSELF BUT THIS EXERCISE HAD NOT BEEN DONE BY HIM, THEREFORE, THE IMPUGNED ORDER PASSED BY THE LD. PR. CIT MAY BE QUASHED. REL IANCE WAS PLACED ON THE FOLLOWING CASE LAWS: 10 * DIRECTOR OF INCOME TAX VS. JYOTI FOUNDATION [2013 ] 357 ITR 388 (DELHI) * M/S COLORS TEXTILES LIMITED VS. ITO IN ITA NO. 15 14/CHD/2017 FOR THE A.Y. 2013-14 DT. 05/12/2018 * SH. ABHIMANYU GUPTA VS. THE PR. CIT IN ITA NO. 77 1/CHD/2017 FOR THE A.Y. 2012-13 DT. 09/04/2018 * M/S WORLDWIDE IMMIGRATION CONSULTANCY PVT. LTD. V S. PR. CIT-I IN ITA NO. 772/CHD/2017 FOR THE A.Y. 2012-13 DT. 13/11/201 9. 6.7 IT WAS REITERATED THAT THE A.O. ASKED THE ASSES SEE TO FURNISH THE INFORMATION RELATING TO INVESTOR COMPANIES WHICH WE RE FURNISHED VIDE LETTER DT. 14/12/2016 COPY OF WHICH IS PLACED AT PAGE NO. 188 TO 196 OF THE ASSESSEES PAPER BOOK, THEREFORE IT WAS NOT A CASE OF LACK OF ENQUIRY AND ONLY ON THE SUSPICION, THE ASSESSMENT ORDER FRAMED BY THE A.O. AFTER THE PROPER ENQUIRY AND APPLICATION OF MIND, CANNOT BE SET ASIDE, THE RELIA NCE WAS PLACED ON THE FOLLOWING CASE LAWS: CIT VS. SUNBEAM AUTO LTD. [2011] 332 ITR 167 (DELHI ) DIRECTOR OF INCOME TAX VS. JYOTI FOUNDATION [2013] 357 ITR 388 (DELHI) MALABAR INDUSTRIAL CO. LTD. VS. CIT [2000] 243 ITR 83 (SC) RELIANCE WAS ALSO PLACED ON THE DECISION DT. 17/08/ 2009 OF THE HON'BLE JURISDICTIONAL HIGH COURT IN ITA NO. 445 OF 2008 IN THE CASE OF CIT VS. M/S UNIQUE AUTOFELTS (P) LTD, COPY OF WHICH IS PLACED AT PAGE NO. 1 TO 6 OF THE ASSESSEES PAPER BOOK. IT WAS ACCORDINGLY SUBMITTED THAT THE L D. PR. CIT WAS NOT JUSTIFIED IN INVOKING THE PROVISIONS OF SECTION 263 OF THE ACT A ND DIRECTING THE A.O. TO MAKE ASSESSMENT DENOVO AFTER PROPERLY EXAMINING THE FACT S WHICH THE A.O. HAD ALREADY VERIFIED/EXAMINED WHILE FRAMING THE ASSESSM ENT UNDER SECTION 143(3) OF THE ACT, THEREFORE THE IMPUGNED ORDER MAY BE SET AS IDE. 7. IN HIS RIVAL SUBMISSIONS THE LD. CIT DR STRONGLY SUPPORTED THE IMPUGNED ORDER PASSED BY THE LD. PR. CIT AND FURTHER SUBMITT ED THAT THE A.O. HAD NOT MADE THE PROPER ENQUIRY BEFORE FRAMING THE ASSESSME NT, THEREFORE THE ASSESSMENT ORDER PASSED BY THE A.O. WAS ERRONEOUS. IT WAS FURTHER SUBMITTED 11 THAT ALL THE COMPANIES WHO MADE THE INVESTMENT IN A SSESSEE COMPANY WERE DUBIOUS COMPANY AND WERE ONLY PAPER COMPANY WHICH F ACT HAS NOT BEEN ENQUIRED BY THE A.O. THEREFORE THE LD. PR. CIT RIGH TLY DIRECTED THE A.O. TO MAKE PROPER ENQUIRY AND TO FRAME ASSESSMENT DENOVO. THE RELIANCE WAS PLACED ON THE FOLLOWING CASE LAWS: RAJMANDIR ESTATES PRIVATE LTD. VS. PRINCIPAL COMMIS SIONER OF INCOME TAX [2016] 386 ITR 162(CAL). SUMATI DAYAL VS. CIT (1995) 214 ITR 801(SC) CIT VS. ACTIVE TRADERS PVT. LTD. DENIEL MERCHANTS P LTD & ANR VS. ITO & ANR IN SLP(C ) NO.S 23976/2017 JAI COMMERCIAL CO. LTD. VS. JOINT CIT(2000) 66 TTJ (DEL-TRIB) 731 EXPRESS NEWSPAPERS (P) LTD. VS. CIT (2002) 255 ITR 137(MAD), DESAI BROTHERS LTD. VS. DY CIT(1998) 66 ITD 203(PUN E-TRIB) GEE VEE ENTERPRISES VS. ADDL. CIT & ORS. (1975) 99 ITR 375(DEL) CIT VS. PUSHPA DEVI (1987) 164 ITR 639 LAJJA WATI SINGHAL, SMT. VS. CIT (1997) 226 ITR 527 (ALL) P.K. FABRICS VS. ASSTT. CIT(1998) 67 ITD 326(ASR-TR IB) V. NARAYANAN VS. DY. CIT(2004) 88 ITD 43 (CHENNAI-T RIB) AMBIKA AGRO SUPPLIERS VS. ITO(2005) 95 ITD 326 (PUNE TRIB) 8. WE HAVE CONSIDERED THE SUBMISSIONS OF BOTH THE P ARTIES AND PERUSED THE MATERIAL AVAILABLE ON THE RECORD. IN THE PRESENT CA SE THE A.O. FRAMED THE ASSESSMENT UNDER SECTION 143(3) OF THE ACT VIDE ORD ER DT, 27/12/2016. BEFORE COMPLETING THE ASSESSMENT, THE A.O. ISSUED THE NOTI CE UNDER SECTION 142(1) ALONGWITH QUESTIONNAIRE TO THE ASSESSEE ON 03/06/20 16. IN RESPONSE TO THE SAID NOTICE THE ASSESSEE FURNISHED REPLY. THEREAFTER AGA IN THE A.O. ISSUED NOTICE DT. 18/10/2016 IN RESPONSE TO WHICH THE ASSESSEE SUBMIT TED AS UNDER: RESPECTED MADAM, KINDLY REFER TO THE NOTICE AS MENTIONED ABOVE. 12 DURING THE ASSESSMENT PROCEEDINGS PENDING BEFORE YO UR KIND HONOR YOUR GOOD SELF HAS DIRECTED THE ASSESSEE TO FILE CERTAIN INFO RMATION AND DOCUMENTS FOR AY 20: 2015. IN THIS CONNECTION, THE ASSESSEE MOST RESPECTFULLY SUBMITS HERE WITH FOLTOWI INFORMATION AND DOCUMENTS FOR YOUR KIND PERUSAL AND RECORDS:- 1. AS PER PARA 1, DETAIL OF ADDITION TO SHARE APPLICAT ION MONEY, SHARE CAPITAL AND SHARE PREMIUM IS ATTACHED HERE WITH FOR YOUR KI ND PERUSAL AND RECORDS. 2. AS PER PARA 2, COPY OF ITRS, COMPUTATION OF INCOME, BANK STATEMENTS AND CONFIRMATIONS OF SH. LOKESH KUMAR, SMT. MADHU AUL A ND LOKESH KUMAR HUF IS ENCLOSED HERE WITH FOR YOUR KIND REFERENCE AND RECO RDS. A COPY OF SHARE APPLICATION MONEY FORM, CONFIRMATION CERTIFICATE FR OM DEPOSITOR COMPANY, COPY OF RESOLUTION FOR SHARE APPLICATION TO THE ASSESSEE COMPANY, BANK STATEMENT, COPY OF PAN CARD ALONG WITH A COPY OF MEMORANDUM AN D ARTICLES OF ASSOCIATION IS ATTACHED HERE W H ; OR YOUR REFERENCE AND RECORDS IN CASE OF FOLLOWING PERSONS:- A) PANSY DEALER P. LTD. B) DAISY SUPPLIERS P. LTD. C) ZINNIA SALES P. LTD. D) SUNFLAME DISTRIBUTORS P. LTD. E) NILAY DISTRIBUTORS P. LTD. F) VIRAT COMMOSALE P. LTD. 3. THE DOCUMENTS AS MENTIONED IN PARA 2 ABOVE VERY CLEARLY PROVE THE IDENTITY/CREDIT WORTHINESS AND GENUINENESS OF THE T RANSACTION BY THE DEPOSITORS. THE ASSESSEE HOPES YOUR GOOD SELF WILT FIND THE ABO VE INFORMATION AND DOCUMENTS IN ORDER. 4. THE INFORMATION AS PER PARA 4 IS ENCLOSED HERE WITH FOR YOUR READY REFERENCE AND RECORDS AND THE PREMIUM ON THE SHARES HAS BEEN CHARGED BASED ON THE PAST FINANCIAL PERFORMANCE OF THE COMPANY AS PER AU DITED BALANCE SHEETS AND IS RECEIVED AS PER PROVISO OF SECTION 56(2)(VIIB) O F INCOME TAX ACT, 1961. 5. AS PER PARA 5, A COPY OF BANK STATEMENT IS ATTACHED HERE WITH FOR YOUR KIND REFERENCE AND RECORDS. 6. AS PER PARA 6, THE INFORMATION AS CALLED FOR BY YOU R GOOD SELF HAS ALREADY BEEN FILED IN ANNEXURE 2 AS A PART OF TAX AUDIT REPORT W HICH WAS FILED IN 1ST WRITTEN SUBMISSION AS PER POINT 1 OF THE QUESTIONNAIRE DATE D 03.06.2016 FOR THE YEAR UNDER CONSIDERATION. 7, AS PER PARA 7, A COPY OF RETURN OF ALLOTMENT FIL ED WITH ROC IS ENCLOSED HERE WITH FOR YOUR REFERENCE AND RECORDS. COMPLETE BOOKS OF ACCOUNTS ALONG WITH VOUCHERS FOR PURCHASE/SALE OF GOODS, VOUCHERS FOR DIRECT EXPENSES, VAT RETURNS, VOUCHERS FOR EXPENSES DEBITED TO PROFIT & LOSS ACCOUNT AND TDS RETURNS ARE PRODUCED HERE WI TH FOR YOUR KIND PERUSAL. THE ASSESSEE HOPES YOUR GOOD SEIF WIII FIND THE ABO VE INFORMATION AND DOCUMENTS IN ORDER. IT IS THEREFORE REQUESTED THAT THE ASSESS MENT IN THE CASE MAY KINDLY BE COMPLETED AND OBLIGE. 13 8.1 AFTER CONSIDERING THE SUBMISSIONS OF THE ASSESS EE AND THE MATERIAL ON RECORD THE A.O. FRAMED THE ASSESSMENT UNDER SECTION 143(3) OF THE ACT ON THE RETURNED INCOME I.E; RS. 19,52,040/-. HOWEVER THE L D. PR. CIT EXERCISED HIS REVISIONARY POWER UNDER SECTION 263 OF THE ACT AND CONSIDERED THE ASSESSMENT ORDER PASSED BY THE A.O. AS ERRONEOUS AND PREJUDICI AL TO THE INTEREST OF THE REVENUE FOR THE REASONS THAT PROPER AND SUFFICIENT ENQUIRY HAD NOT BEEN MADE BY THE A.O. AND THAT THE DIRECTORS OF THE INVESTOR COMPANIES WERE NOT PRODUCED, SO THE GENUINENESS OF THE TRANSACTION WAS NOT ESTABLISHED. 8.2 LD. PR. CIT ALSO OBSERVED THAT ONLY A SUPERFICI AL LAOK AT THE DOCUMENTS SUBMITTED BY THE ASSESSEE HAD BEEN MADE AND CONTENT ION OF THE ASSESSEE HAD BEEN ACCEPTED BY THE A.O. WITHOUT ANY INDEPTH EXAMI NATION AND SUCH LAPSE HAD RENDERED THE ASSESSMENT ORDER ERRONEOUS IN SO F AR AS IT WAS PREJUDICIAL TO THE INTEREST OF THE REVENUE. THE RELIANCE WAS PLACE D MAINLY ON THE JUDGMENT OF THE HON'BLE KOLKATA HIGH COURT IN THE CASE RAJMANDI R ESTATES PVT. LTD. VS. PCIT IN ITA NO. 173 OF 2016 ORDER DT. 13/05/2016 ALONG WITH OTHER CASE LAWS MENTIONED AT PAGE NO. 11 TO 14 OF THE IMPUGNED ORDER. 8.3 NOW WE HAVE TO CONSIDER AS TO WHETHER THE A.O. HAD MADE THE PROPER ENQUIRY OR NOT AND THAT THE VIEW TAKEN BY THE A.O. WAS A POSSIBLE VIEW IN ACCORDANCE WITH LAW OR NOT. 8.4 THE POWER OF THE LD. PR. CIT UNDER SECTION 263 OF THE ACT AND THE CONDITION TO INVOKE THE SAME MAY BE SUMMARIZED AS U NDER: (I) 'THE PR. CIT MUST RECORD SATISFACTION THAT THE ORDE R OF THE AO IS ERRONEOUS AND PREJUDICIAL TO THE INTERESTS OF THE REVENUE. BO TH THE CONDITIONS MUST BE FULFILLED. (II) SEC. 263 CANNOT BE INVOKED TO CORRECT EACH AND EVER Y TYPE OF MISTAKE OR ERROR COMMITTED BY THE A.O. AND IT IS ONLY WHEN AN O RDER IS ERRONEOUS, THE SECTION WILL BE ATTRACTED. (III) AN INCORRECT ASSUMPTION OF FACTS OR AN INCORRECT AP PLICATION OF LAW WILL SUFFICE FOR THE REQUIREMENT OF THE ORDER BEING ERRO NEOUS. 14 (IV) IF THE ORDER IS PASSED WITHOUT APPLICATION OF MIND, SUCH ORDER WILL FALL UNDER THE CATEGORY OF ERRONEOUS ORDER. (V) EVERY LOSS OF REVENUE CANNOT BE TREATED AS PREJUDIC IAL TO THE INTEREST OF THE REVENUE AND IF THE AO HAS ADOPTED ONE OF THE CO URSES PERMISSIBLE UNDER LAW OR WHERE TWO VIEWS ARE POSSIBLE AND THE A O HAS TAKEN ONE VIEW-WITH WHICH THE PR. CIT DOES NOT AGREE, IT CANNOT BE TREA TED AS AN ERRONEOUS ORDER, UNLESS THE VIEW TAKEN BY THE AO IS UNSUSTAINABLE UND ER THE LAW. (VI) IF WHILE MAKING THE ASSESSMENT, THE A.O. EXAMINES TH E ACCOUNTS, MAKES ENQUIRIES, APPLIES HIS MIND TO THE FACTS AND CIRCUM STANCES OF THE CASE AND DETERMINES THE INCOME, THE PR. CIT, WHILE EXERCISIN G HIS POWER UNDER S. 263, IS NOT PERMITTED TO SUBSTITUTE HIS ESTIMATE OF INCOME IN P LACE OF THE INCOME ESTIMATED BY THE A.O. (VII) THE AO EXERCISES QUASI-JUDICIAL POWER VESTED IN HIM AND IF HE EXERCISES SUCH POWER IN ACCORDANCE WITH LAW AND ARRIVES AT A CONCLUSION, SUCH CONCLUSION CANNOT BE TERMED TO BE ERRONEOUS SIMPLY BECAUSE THE PR. CIT DOES NOT FEEL SATISFIED WITH THE SAID CONCLUSION. (VII) THE PR. CIT, BEFORE EXERCISING HIS JURISDICTION UND ER S. 263, MUST HAVE MATERIAL ON RECORD TO ARRIVE AT A SATISFACTION. (IX) IF THE AO HAS MADE ENQUIRIES DURING THE COURSE OF ASSESSMENT PROCEEDINGS ON THE RELEVANT ISSUES AND THE ASSESSEE HAS GIVEN DETAILED EXPLANATION BY A LETTER IN WRITING AND THE AO ALLOWE D THE CLAIM ON BEING SATISFIED WITH THE EXPLANATION OF THE ASSESSEE, THE DECISION OF THE AO CANNOT BE HELD TO BE ERRONEOUS SIMPLY BECAUSE IN HIS ORDER HE DOES NO T MAKE AN ELABORATE DISCUSSION IN THAT REGARD.' 8.5 IN THE PRESENT CASE THE A.O. DURING THE COURSE OF ORIGINAL ASSESSMENT PROCEEDINGS, ISSUED THE QUESTIONNAIRE TO THE ASSESS EE AND IN RESPONSE THERETO THE ASSESSEE FURNISHED THE REPLY DT. 08/11/2016 & 1 4/12/2016 COPY OF WHICH ALONG WITH SUPPORTING DOCUMENTS ARE PLACED AT PAGE NO. 1 TO 274 OF THE ASSESSEES COMPILATION. IN THE SAID REPLIES THE ASSE SSEE FURNISHED THE DETAILS OF THE SHARE APPLICATION MONEY RECEIVED DURING THE YEAR AL ONGWITH CONFIRMATION CERTIFICATE FROM DEPOSITOR COMPANY, COPIES OF THE R ESOLUTION FOR SHARE APPLICATION MONEY TO THE ASSESSEE COMPANY, BANK STA TEMENT, COPY OF PAN CARD AND MEMORANDUM & ARTICLE OF ASSOCIATION OF THE INVESTOR COMPANIES, DETAILS OF THE SHARE ISSUED AT PREMIUM, COPY OF BAN K STATEMENT OF THE ASSESSEE COMPANY MAINTAINED WITH BANK OF BARODA, COPY OF THE RETURN OF ALLOTMENT OF SHARES FILED WITH ROC IN FORM NO. PAS-3, COPY OF TH E AUDITED REPORT ALONGWITH AUDITED BALANCE SHEET, P&L ACCOUNT AND BANK STATEME NT ETC OF THE INVESTOR 15 COMPANIES. THE A.O. ISSUED THE NOTICE UNDER SECTION 133(6) OF THE ACT TO THE INVESTOR COMPANIES, COPIES OF WHICH ARE PLACED AT P AGE NOS. 275 TO 280 OF THE ASSESSEES COMPILATION. IN RESPONSE TO THOSE LETTER S, THE INVESTOR COMPANIES FURNISHED THE CONFIRMATORY LETTERS TO THE A.O. ALON GWITH DOCUMENTS RELATING TO THE FINANCIAL STATEMENTS FILED WITH THE REGISTRAR O F THE COMPANIES, COPIES OF THE SAID DOCUMENTS ARE PLACED AT PAGE NO. 281 TO 370 OF THE ASSESSEES COMPILATION. THE ASSESSEE ALSO FURNISHED THE DETAIL ED CALCULATION SHEET OF FAIR MARKET VALUE OF UNQUOTED EQUITY SHARES, COPIES OF W HICH IS PLACED AT PAGE NOS. 476 & 477 OF THE ASSESSEES COMPILATION. THE A.O. AFTER MAKING THE PROPER EXAMINATION OF THO SE DOCUMENTS ACCEPTED THE VALUATION OF SHARES ISSUED BY THE ASSE SSEE AT PREMIUM OF RS. 15/- PER SHARE. ACCORDINGLY, THE FAIR MARKET VALUE OF UN QUOTED EQUITY SHARES UNDER RULE 11UA OF THE INCOME TAX RULES WAS ACCEPTED AT R S. 25/- PER SHARE. THE LD. PR. CIT ALTHOUGH HELD THAT THE ASSESSMENT WAS COMPL ETED WITHOUT MAKING PROPER ENQUIRY HOWEVER THE VALUATION OF THE SHARE FURNISHE D TO THE A.O. BY THE ASSESSEE HAS NOT BEEN DOUBTED. ON THE BASIS OF AFORESAID DIS CUSSION, IT CAN BE SAID THAT THE A.O. NOT ONLY ASKED THE RELEVANT DOCUMENTS FROM THE ASSESSEE BUT ALSO CONSIDERED THOSE DOCUMENTS FURNISHED BY THE ASSESSE E WHILE FRAMING THE ASSESSMENT UNDER SECTION 143(3) OF THE ACT. IN THE PRESENT CASE, THE ALLEGATION OF THE LD. PR. CIT IS THAT THE A.O. HAD NOT MADE PR OPER ENQUIRY, HOWEVER IT IS NOT THE CASE OF THE LD. PR. CIT THAT THERE WAS A LACK O F ENQUIRY. 8.6 ON A SIMILAR ISSUE THE HON'BLE DELHI HIGH COURT IN THE CASE OF CIT VS. SUNBEAM AUTO LTD. [2011] 332 ITR 167 (SUPRA) HELD A S UNDER: (I) THAT THE ASSESSING OFFICER ALLOWED THE CLAIM O N BEING SATISFIED WITH THE EXPLANATION OF THE ASSESSEE. SUCH DECISION OF THE A SSESSING OFFICER COULD NOT BE HELD TO BE ERRONEOUS SIMPLY BECAUSE IN HIS ORDER HE DID NOT MAKE AN ELABORATE DISCUSSION IN THAT REGARD. THE ASSESSING OFFICER HA D CALLED FOR EXPLANATION ON THE VERY ITEM FROM THE ASSESSEE AND THE ASSESSEE HAD FU RNISHED ITS EXPLANATION. THIS FACT WAS CONCEDED BY THE COMMISSIONER HIMSELF IN HI S ORDER. THIS SHOWED THAT THE ASSESSING OFFICER HAD UNDERTAKEN THE EXERCISE OF EXA MINING AS TO WHETHER THE EXPENDITURE INCURRED BY THE ASSESSEE IN THE REPLACE MENT OF DIES AND TOOLS WAS TO 16 BE TREATED AS REVENUE EXPENDITURE OR NOT. THEREFORE , IT COULD NOT BE SAID THAT IT WAS A CASE OF LACK OF INQUIRY. THE ACCOUNTING PRACT ICE FOLLOWED FOR A NUMBER OF YEARS HAD THE APPROVAL OF THE INCOME-TAX AUTHORITIE S. EVEN FOR FUTURE ASSESSMENT YEARS, THE VERY SAME ACCOUNTING PRACTICE WAS ACCEPT ED. 8.7 IN THE PRESENT CASE ALSO THE A.O. HAD CALLED TH E EXPLANATION FROM THE ASSESSEE ON THE ISSUE RELATING TO THE SHARE PREMIUM AND THE ASSESSEE HAD FURNISHED ITS EXPLANATION WHICH WAS EXAMINED BY THE A.O. THE ASSESSEE ALSO FURNISHED THE VALUATION REPORT OF THE SHARE PREMIUM AND THEREAFTER THE A.O. FRAMED THE ASSESSMENT UNDER SECTION 143(3) OF THE A CT, SO IT WAS NOT A CASE OF LACK OF ENQUIRY. 8.8 SIMILARLY THE HON'BLE DELHI HIGH COURT IN THE C ASE OF DIT VS. JYOTI FOUNDATION [2013] 357 ITR 388 (SUPRA) HELD AS UNDER : THAT INQUIRIES WERE CERTAINLY CONDUCTED BY THE AS SESSING OFFICER. IT WAS NOT A CASE OF NO INQUIRY. THE ORDER UNDER SECTION 263 ITS ELF RECORDED THAT THE DIRECTOR FELT THAT THE INQUIRIES WERE NOT SUFFICIENT AND FUR THER INQUIRIES OR DETAILS SHOULD HAVE BEEN CALLED FOR. THE INQUIRY SHOULD HAVE BEEN CONDU CTED BY THE DIRECTOR HIMSELF TO RECORD THE FINDING THAT THE ASSESSMENT ORDER WAS ERRONEOUS. HE SHOULD NOT HAVE SET ASIDE THE ORDER AND DIRECTED THE ASSESSING OFFICER TO CONDUCT THE INQUIRY. 8.9 IN THE PRESENT CASE ALSO THE A.O. MADE THE ENQU IRIES, SO IT WAS NOT A CASE OF NO ENQUIRY AND IF THE LD. PR. CIT WAS NOT SATISF IED FROM THE ENQUIRY MADE BY THE AO HE SHOULD HAVE CONDUCTED THE ENQUIRY HIMSELF TO RECORD THE FINDINGS THAT THE ASSESSMENT ORDER WAS ERRONEOUS HE SHOULD N OT HAVE SETASIDE THE ORDER PASSED BY THE AO AND DIRECTING HIM TO CONDUCT THE E NQUIRY. 8.10 ON A SIMILAR ISSUE THE HONBLE JURISDICTIONAL HIGH COURT IN THE CASE OF CIT VS. M/S UNIQUE AUTOFELTS (P) LTD. (SUPRA) HELD AS U NDER: 5. FROM THE FINDING OF THE TRIBUNAL, IT IS CLEAR T HAT THE ASSESSEE HAD GIVEN PROPER EXPLANATION BY FILING THE NECESSARY CONFIRMA TIONS. IN VIEW OF SUCH A FINDING, THE TRIBUNAL RIGHTLY HELD THAT POWER UNDER SECTION 263 OF THE ACT COULD BE EXERCISED WHERE VIEW TAKEN BY AN ASSESSING OFFICER W AS ERRONEOUS. WHILE EXERCISING SUCH POWER, THE COMMISSIONER WAS BOUND T O TAKE INTO ACCOUNT ALL RELEVANT FACTS. IF ORDER INVOKING THE SAID POWER PR OCEEDS ON AN ERRONEOUS ASSUMPTION, THE SAME COULD BE SET ASIDE BY THE TRIB UNAL. FINDING OF THE TRIBUNAL IS NOT SHOWN TO BE PERVERSE. NO SUBSTANTIAL QUESTION O F LAW ARISES. 17 8.11 ONE SIMILAR ISSUE HAS ALSO BEEN DECIDED BY THE ITAT BENCH B CHANDIGARH IN ITA NO. 1348/CHD/2017 FOR THE A.Y. 20 12-13 IN THE CASE OF M/S TECHNICO METALS PVT. LTD. VS. DCIT WHEREIN VIDE ORDER DT. 15/02/2019 RELEVANT FINDINGS HAVE BEEN GIVEN AS UNDER: 8. WE HAVE CONSIDERED THE ABOVE SUBMISSIONS OF LD. REPRESENTATIVES OF THE PARTIES. IT IS NOTICED FROM THE RECORD THAT THE AS SESSEE COMPANY TO PROVE THE IDENTITY AND CREDITWORTHINESS OF THE INVESTOR COMPA NIES AND GENUINENESS OF THE TRANSACTIONS HAS FURNISHED THE FOLLOWING DOCUMENTS INRELATION TO THE INVESTOR COMPANY. (A) M/S LAWA MARKETING (P) LTD. A) COPY OF APPLICATION FORM FOR EQUITY SHARES B) COPY OF STATEMENT OF BANK ACCOUNT OF TRANSACTIONS E FFECTED ON 20.03.2012 C) COPY OF PERMANENT ACCOUNTS-LUMBER D) COPY OF INCOME-TAX RETURN ACKNOWLEDGEMENT OF A.Y. 2 011-12 E) COPY OF BLANK SHARE TRANSFER FORM G) COPY OF CERTIFICATE OF INCORPORATION F) COPY OF MEMORANDUM AND ARTICLES OF ASSOCIATION G) COPY OF LETTER (ALONG WITH ENCLOSED COPIES) TO THE DEPUTY DIRECTOR OF INCOME-TAX, DDIT(LNV.), UNIT-(I)L, KOLKATA; WHER EIN INFORMATION WAS FURNISHED U/S 131 OF THE INCOME-TAX ACT, 1961 I N THE CASE OF M/S TECHNICO METALS (P.) LTD. FOR A.Y. 2012-13: (I) COPY OF FORM OF APPLICATION FOR EQUITY SHARES (II) COPY OF BANK STATEMENT OF YES BANK FROM 0 1.03.2012 TO31.03.2012 EVIDENCING THE FACT THAT M/S LAWA MARKETING (P.) LT D. HADPAID A SHARE APPLICATION MONEY OF RS. 25,00,000/- THROUGH RTGSDA TED 20.03.2012. THE SAME WAS SOURCED OUT OF SALE OF SHARES FOR RS.32,00,000/ - TO M/S ABILITY DEALMARK (P.) LTD. ON 20.03.2012. (III) COPY OF INCOME-TAX RETURN ACKNOWLEDGEMENT OF A.Y. 2012-13 (III) COPYOF DIRECTORS REPORT, AUDITORS REPORT AN D BALANCE SHEET OF M/S LAWA MARKETING (P) LTD. AS AT 31.03.2012 ALONGWITH A SC HEDULE OF DETAILS OF INVESTMENTS. H) COPY OF CONFIRMATION G) COPY OF SHARE CERTIFICATE (B) M/S PANSY DEALER (P) LTD. A) COPY OF SUMMONS ISSUED TO M'S PANSY DEALER PVT. LTD. U/S 131 OF THE INCOME-TAX ACT. 1961 BY THE DEPUTY DIRECTOR OF INCOME-TAX (INVESTIGATION), UNIT 1(1), KOLKATA B) COPY OF APPLICATION FORMS FOR EQUITY SHARES C) COPY OF INCOME-TAX RETURN ACKNOWLEDGEMENT OF A. Y. 2011-12 18 D) COPY OF LETTER (ALONG WITH ENCLOSED COPIES) TO THE DEPUTY DIRECTOR OF INCOME-TAX, DDIT(INV.). UNIT-(L)L. KOLKATA; WHER EIN INFORMATIONWAS FURNISHED U/S 131 OF THE INCOME-TAX ACT. 1961 IN THE CASE OF M/ST ECHNICO METALS (P.) LTD. FOR A.Y. 2012-13: (I) COPY OF FORM OF APPLICATION FOR EQUITY SHARES (II) COPY OF BANK STATEMENT OF INDUSIND BANK FROM 1 9.03.2012 TO31.03.2012 EVIDENCING THE FACT THAT M/S PANSY DEALER (P.) LTD. HADPAID A SHARE APPLICATION MONEY OF RS. 25,00,000/- THROUGH RTGSDATED 21.03.20 12. (III) COPY OF INCOME-TAX RETURN ACKNOWLEDGEMENT OF A.Y. 2012-13 (III) COPY OF DIRECTOR'S REPORT, AUDITOR'S REPORT A ND BALANCE SHEET OFM/S PANSY DEALER (P.) LTD. AS AT 31.03.2012 ALONG WITH A SCHE DULE OFDETAILS OF INVESTMENTS. E) COPY OF CONFIRMATION F) COPY OF EXTRACT OF MINUTES OF BOARD MEETING OF M/S PANSY DEALER(P.) LTD. G) COPY OF SHARE CERTIFICATE 9. A PERUSAL OF THEABOVE REVEALS THAT THE ASSESSEE HAD FURNISHED THE RELEVANT DOCUMENTS TO PROVE THE IDENTITY, CREDITWOR THINESS OF THE INVESTORS AS WELL AS GENUINENESS OF THE TRANSACTIONS. HOWEVER, THE AS SESSING OFFICER HARPEDTHE ASSESSEE TO PRODUCE THE DIRECTORS OF THE INVESTOR C OMPANY BEFORE HIM, IN REPLY, TO WHICH THE ASSESSEE SUBMITTED AS UNDER:- INSPITE OF THE BEST EFFORTS MADE BY THE ASSESSEE C OMPANY, NONE OF THE SUBSCRIBER IS AGREED TO BE PERSONALLY PRESENT BEFOR E YOUR HONOR, SINCE, ALL THESE ARE STAYING IN KOLKATA OR OTHER PLACES WHICH ARE FA R FROM LUDHIANA. THE ASSESSEE COMPANY HAS ALREADY SUBMITTED CONFIRMATIONS GIVING THEIR FULL ADDRESSES. YOUR HONOR IS REQUESTED TO KINDLY SUMMON THESE PARTIES B Y USING YOUR GOOD OFFICE. THE ASSESSEE COMPANY IS READY TO MAKE PAYMENT OF DIET M ONEY FOR THE SAME. 10. THE LD. COUNSEL IN THIS RESPECT HAS ALSO RELIED ON THE DECISION OF THE HON'BLE RAJASTHAN HIGH COURT IN THE CASE OF CIT VS. JALAN HARD COKE LTD.,[2018] 95 TAXMANN.COM 330(RAJASTHAN), WHEREIN, IN SOMEWHAT IDENTICAL FACTS, THE ASSESSEE EXPRESSED ITS INABILITY TO PRODUCE THE SHA RE APPLICANTS, THE HON'BLE HIGH COURT HELD THAT ADDITIONS WERE NOT WARRANTED OBSERV ING THAT THE COMPANY CANNOT ASSESS FOR THE INCOME TAX TO FIND OUT THE PE RSONS WHO HAS APPLIED AS SHAREHOLDER. THE SAID DECISION OF THE HON'BLE RAJAS THAN HIGH COURT HAS BEEN AFFIRMED BY THE HON'BLE SUPREME COURT BY WAY OF DIS MISSAL OF SLP FILED AGAINST THE SAID ORDER REPORTED IN CIT VS. JALAN HARD COKE LT D., [2018] 95 TAXMANN.COM 331 (SC). THE LD. COUNSEL HAS ALSO BROUGHT OUR ATTENTIO N TO PARA 6.1 OF THE DECISION OF HON'BLE RAJASTHAN HIGH COURT IN THE CASE OF CIT VS . JALAN HARD COKE LTD. WHEREIN, THE HON'BLE HIGH COURT CONSIDERING THE EN TIRE DECISION OF THE HON'BLE HIGH COURT IN THE CASE OF CIT VS. ARL INFRATECH LTD., [2017] 88 TAXMAN.COM 469 HAS APPROVED THE OBSERVATION OF THE TRIBUNAL THAT T HE ALLEGED REPORT OF THE INSPECTOR OF THE DEPARTMENT WHO HAS STATED TO HAVE VISITED AT THE GIVEN ADDRESS OF THE SHARE APPLICANT WAS NEVER PUT OR CONFRONTED TO THE ASSESSEE AND, HENCE, THE RELIANCE CANNOT BE PLACED ON THE SAID REPORT. 11. IN THIS CASE, THE SHARE APPLICATION MONEY ALONG WITH PREMIUM WAS RECEIVED THROUGH BANKING CHANNEL. THE DETAILS OF TH E BANK ACCOUNT OF THE INVESTOR HAVE BEEN DULY SUPPLIED. EVEN THE SOURCE O F FUNDS OF THE INVESTOR IS ALSO EXPLAINED. THE INCOME TAX RETURNS OF THE INVESTOR A RE ALSO FURNISHED. THE INVESTOR COMPANIES HAVE BEEN DULY REGISTERED UNDER THE INDIA N COMPANIES ACT AND THERE IS NO EVIDENCE ON FILE THAT THEIR REGISTRATIO N HAS BEEN CANCELLED OR THAT THE 19 INVESTOR COMPANIES HAVE BEEN DECLARED AS NON-EXISTE NT OR SHELL COMPANIES. IN RESPONSE TO SUMMONS ISSUED BY THE DDIT (INV), KOLKA TA, INVESTOR COMPANIES DULY FILED ALL THE DETAILS AND DULY CONFIRMED THAT THEY HAD INVESTED IN THE SHARES OF THE ASSESSEE COMPANY. THE ONLY REASON FOR WHICH THE AFO RESAID INVESTMENT HAS BEEN DISBELIEVED BY THE ASSESSING OFFICER IS ON THE GROU ND THAT THE INSPECTOR OF THE INCOME TAX AT KOLKATA HAD REPORTED THAT THE AFORESA ID COMPANIES COULD NOT BE TRACED OUT AT THE GIVEN ADDRESS. HOWEVER, WE FIND F ROM THE RECORD THAT THE ASSESSEE COMPANY HAS FURNISHED THE BANK DETAILS OF THE INVESTOR COMPANIES. THE ADDRESS ON THE EXISTENCE OF THE SAID COMPANIES COUL D HAVE BEEN VERIFIED FROM THE ACCOUNT OPENING FORMS ETC. IT IS IN THE COMMON KNOWLEDGE THAT THE ACCOUNTS ARE OPENED IN THE BANK THROUGH INTRODUCERS WHO APPR OVE THAT THE ACCOUNT HOLDER IS KNOWN TO HIM / HER AND IS GENUINE. ENQUIR IES COULD HAVE BEEN MADE FROM THE SAID INTRODUCERS ALSO. APART FROM THAT, TH E COMPANIES HAVE BEEN DULY REGISTERED AT THE GIVEN ADDRESS AND DULY AUDITED BY THE AUDITORS. THE ASSESSEE HAD ALSO PRODUCED ON THE FILE THE REPORT OF THE AUD ITORS IN THE CASE OF BOTH THE INVESTOR COMPANIES WHO HAVE AUDITED THE ACCOUNTS OF THE AFORESAID FIRMS. IF THERE WAS ANY DOUBT ABOUT THE EXISTENCE OF SUCH COM PANIES, THE CONCERNED AUDITORS, CA OF THE RESPECTIVE COMPANIES COULD HAVE BEEN ENQUIRED / INVESTIGATED. IT HAS BEEN EXPLAINED THAT THE M/S LA WA MARKETING (P.) LTD. HAD PAID SHARE APPLICATION MONEY OF RS. 25 LACS THROUGH RTGS AND THE SAME WAS SOURCED OUT OF THE SALE OF SHARES FOR RS. 32 LACS T O M/S ABILITY DEALMARK (P.) LTD.). SIMILARLY, THE SOURCE OF FUNDS IN THE CASE OF M/S P ANSY DEALER (P.) LTD. HAS BEEN EXPLAINED THAT THE SAME WERE SOURCED BY SALE OF SHA RES OF M/S MALCOM MARKETING PVT. LTD. THERE IS VOLUMINOUS RECORD PLA CED ON THEFILE SUCH AS SHARE APPLICATION FORMS, SHARE CERTIFICATES, BANK ACCOUNT S STATEMENTS, CONFIRMATION FROM THE INVESTORS, CERTIFICATE OF INCORPORATION OF THE SAID COMPANIES, DIRECTORS REPORT, AUDITORS REPORT AND BALANCE SHEETS ETC. SO FAR AS THE QUESTION AS TO WHY THE SAID INVESTMENT COMPANY WOULD INVESTIGATE THE A SSESSEE COMPANY, THAT IN OUR VIEW, IS THE INTERNAL / MARKET DECISION OF THE SAID INVESTOR COMPANY AND THAT CANNOT BE A BASIS FOR HOLDING THAT THE SAID INVESTO R IS BOGUS. SO FAR AS THE OBSERVATION THAT THE INVESTOR COMPANIES WERE RUNNIN G INTO LOSSES, THE LD. COUNSEL FOR THE ASSESSEE IN THIS RESPECT HAS DEMONSTRATED FROM THE BALANCE SHEET, THAT AS ON THE DATE OF INVESTMENT, THE SAID COMPANIES WERE HAVING HUGE SURPLUSES, WHICH WERE SUFFICIENT TO MAKE THE AFORESAID INVESTM ENT. UNDER THE CIRCUMSTANCES, THE SOLE REPORT OF THE INSPECTOR THA T HE COULD NOT TRACE THE COMPANIES, WHICH HAS BEEN SUBMITTED IN THE BACK OF THE ASSESSEE WITHOUT ANY OPPORTUNITY TO THE ASSESSEE TO CONFRONT THE SAME, I S NOT SUFFICIENT TO HOLD THAT THE AFORESAID TRANSACTIONS WERE BOGUS. MOREOVER, THERE IS NO EVIDENCE ON THE FILE THAT THE AMOUNTS INVESTED BY THE AFORESAID COMPANIE S WAS THE OWN MONEY OF THE ASSESSEE. 12. IN VIEW OF THIS, WE DO NOT FIND ANY JUSTIFICATI ON ON THE PART OF THE LOWER AUTHORITIES IN MAKING THE IMPUGNED ADDITIONS. THE S AME ARE ACCORDINGLY SET ASIDE/DELETED. 8.12 IN THE AFORESAID CASE, SOME OF THE INVESTOR CO MPANIES WERE THE SAME WHICH WERE INVOLVED IN THE PRESENT CASE AND THE SHA RE PREMIUM WAS RS. 390/- PER SHARE IN THE SAID CASE WHILE IN THE PRESENT CAS E THE SHARE PREMIUM WAS ONLY OF RS. 15/- PER SHARE WHICH WAS BASED ON THE VALUAT ION REPORT. SO BY RESPECTFULLY 20 FOLLOWING THE AFORESAID REFERRED TO ORDER OF THE IT AT AND THE RATIO LAID DOWN BY THE VARIOUS HONBLE HIGH COURTS IN THE AFORESAID RE FERRED TO JUDGMENTS, WE ARE OF THE VIEW THAT THE LD. PR. CIT WAS NOT JUSTIFIED IN CONSIDERING THE ASSESSMENT ORDER PASSED BY THE AO AS ERRONEOUS AND PREJUDICIAL TO TH E INTEREST OF THE REVENUE, PARTICULARLY WHEN THE AO AFTER MAKING THE PROPER EN QUIRY AND CONSIDERING THE VARIOUS DOCUMENTS FURNISHED BY THE ASSESSEE, HAD TA KEN A POSSIBLE VIEW. THEREFORE, THE LD. PR. CIT WAS NOT JUSTIFIED IN CON SIDERING THE ASSESSMENT ORDER PASSED BY THE AO AS ERRONEOUS ON THIS BASIS THAT TH E ASSESSEE COULD NOT PRODUCE THE DIRECTORS, AS HAS BEEN HELD IN THE AFOR ESAID REFERRED TO CASE OF M/S TECHNICO METALS PVT. LTD. VS. DCIT. 8.13 ON A SIMILAR ISSUE, THE HONBLE SUPREME COURT IN THE LANDMARK JUDGMENT REPORTED IN THE CASE OF MALABAR INDUSTRIES VS. CIT( SUPRA) HAS HELD AS UNDER: A BARE READING OF SECTION 263 OF THE INCOME-TAX A CT, 1961, MAKES IT CLEAR THAT THE PREREQUISITE FOR THE EXERCISE OF JURISDICTION B Y THE COMMISSIONER SUOMOTU UNDER IT, IS THAT THE ORDER OF THE INCOME-TAX OFFICE R IS ERRONEOUS IN SO FAR AS IT IS PREJUDICIAL TO THE INTERESTS OF THE REVENUE. THE CO MMISSIONER HAS TO BE SATISFIED OF TWIN CONDITIONS, NAMELY, (I) THE ORDER OF THE ASSES SING OFFICER SOUGHT TO BE REVISED IS ERRONEOUS; AND (II) IT IS PREJUDICIAL TO THE INT ERESTS OF THE REVENUE. IF ONE OF THEM IS ABSENT-IF THE ORDER OF THE INCOME-TAX OFFICER IS ERRONEOUS BUT IS NOT PREJUDICIAL TO THE REVENUE OR IF IT IS NOT ERRONEOUS BUT IS PREJUD ICIAL TO THE REVENUE-RECOURSE CANNOT BE HAD TO SECTION 263(1) OF THE ACT. THE PRO VISION CANNOT BE INVOKED TO CORRECT EACH AND EVERY TYPE OF MISTAKE OR ERROR COM MITTED BY THE ASSESSING OFFICER, IT IS ONLY WHEN AN ORDER IS ERRONEOUS THAT THE SECTION WILL BE ATTRACTED. AN INCORRECT ASSUMPTION OF FACTS OR AN INCORRECT APPLI CATION OF LAW WILL SATISFY THE REQUIREMENT OF THE ORDER BEING ERRONEOUS. IN THE SA ME CATEGORY FALL ORDERS PASSED WITHOUT APPLYING THE PRINCIPLES OF NATURAL J USTICE OR WITHOUT APPLICATION OF MIND. THE PHRASE PREJUDICIAL TO THE INTERESTS OF T HE REVENUE IS NOT AN EXPRESSION OF ART AND IS NOT DEFINED IN THE ACT. UNDERSTOOD IN ITS ORDINARY MEANING IT IS OF WIDE IMPORT AND IS NOT CONFINED TO LOSS OF TAX. THE SCHE ME OF THE ACT IS TO LEVY AND COLLECT TAX IN ACCORDANCE WITH THE PROVISIONS OF TH E ACT AND THIS TASK IS ENTRUSTED TO THE REVENUE. IF DUE TO AN ERRONEOUS ORDER OF THE INCOME-TAX OFFICER, THE REVENUE IS LOSING TAX LAWFULLY PAYABLE BY A PERSON, IT WILL CERTAINLY BE PREJUDICIAL TO THE INTERESTS OF THE REVENUE. THE PHRASE PREJUD ICIAL TO THE INTERESTS OF THE REVENUE HAS TO BE READ IN CONJUNCTION WITH AN ERRO NEOUS ORDER PASSED BY THE ASSESSING OFFICER. EVERY LOSS OF REVENUE AS A CONSEQ UENCE OF AN ORDER OF THE ASSESSING OFFICER, CANNOT BE TREATED AS PREJUDICIAL TO THE INTERESTS OF THE REVENUE, FOR EXAMPLE, WHEN AN INCOME-TAX OFFICER ADO PTED ONE OF THE COURSES PERMISSIBLE IN LAW AND IT HAS RESULTED IN LOSS OF R EVENUE, OR WHERE TWO VIEWS ARE POSSIBLE AND THE INCOME-TAX OFFICER HAS TAKEN ONE VI EW WITH WHICH THE COMMISSIONER DOES NOT AGREE, IT CANNOT BE TREATED A S AN ERRONEOUS ORDER 21 PREJUDICIAL TO THE INTERESTS OF THE REVENUE UNLESS THE VIEW TAKEN BY THE INCOME- TAX OFFICER IS UNSUSTAINABLE IN LAW. 8.14 IN THE PRESENT CASE, AS WE HAVE ALREADY POINTE D OUT THAT THE AO ASKED THE ASSESSEE TO FURNISH THE RELEVANT DETAILS RELATI NG TO THE SHARES ISSUED AT PREMIUM TO VARIOUS COMPANIES AND THE ASSESSEE FURNI SHED ALL THE RELEVANT DOCUMENTS WHICH WERE EXAMINED BY THE AO WHO HAD TAK EN A POSSIBLE VIEW, THEREFORE AS PER THE RATIO LAID DOWN BY THE HON'BLE APEX COURT IN THE AFORESAID REFERRED TO CASE, EVEN IF THE LD. PR. CIT DID NOT A GREE WITH THE VIEW TAKEN BY THE A.O, THE SAID ASSESSMENT ORDER PASSED BY THE A.O., CANNOT BE TREATED AS AN ERRONEOUS ORDER AND PREJUDICIAL TO THE INTEREST OF THE REVENUE. 8.15 IN THE PRESENT CASE THE LD. CIT DR HEAVILY REL IED ON THE JUDGMENTS OF THE HONBLE KOLKATA HIGH COURT IN THE CASE OF RAJMANDIR ESTATES PRIVATE LTD. VS. PRINCIPAL COMMISSIONER OF INCOME TAX [2016] 386 ITR 162(CAL) WHEREIN THE PROMOTER / DIRECTOR OF THE SAID ASSESSEE AND THEIR CLOSE RELATIVES AND FRIENDS HAD UNITED WITH THE MAIN OBJECTIVE OF CREATING COMP ANY APPARENTLY HAVING THE LARGE CAPITAL BASIS BUT INFACT THOSE WERE MERE PAPE R COMPANY HAVING NO REAL WORTH AND THAT THE SHARE WERE OFFERED WHICH WERE SU BSCRIBED BY CLOSELY HELD COMPANIES OWNED BY THE PROMOTER / DIRECTOR OR THEIR CLOSE RELATIVES AND FRIENDS. BUT IN THE PRESENT CASE, THE FACTS ARE DIFFERENT A S THE INVESTOR COMPANIES WERE NOT RELATED OR OWNED BY THE DIRECTOR OF THE ASSESSE E COMPANY AND THE SHARES WERE ALLOTTED AT A PREMIUM OF RS. 15/- PER SHARE, V ALUATION OF WHICH WAS WORKED OUT ON THE BASIS OF DETAILED CALCULATION SHEET, COP Y OF WHICH IS PLACED AT PAGE NO. 47 OF THE ASSESSES COMPILATION. 9. AS REGARDS TO THE ALLEGATION THAT THE ASSESSEE C OULD NOT PRODUCE DIRECTOR OF THE INVESTOR COMPANIES, IT IS NOTICED THAT THE A SSESSEE FURNISHED CONFIRMATORY LETTERS RECEIVED FROM THE INVESTING COMPANIES ALONG WITH COPIES OF THE BALANCE SHEETS, COPIES OF LEDGER ACCOUNTS OF THE BROKER ETC AND REQUESTED TO THE LD. PR. 22 CIT TO ISSUE COMMISSION AS PER PROVISIONS OF SECTIO N 131(1)(D) OF THE ACT, SINCE ALL THE DIRECTORS OF INVESTING COMPANIES WERE PERMANENT LY BASED IN KOLKATA WHICH WAS NEARLY 1700 KM AWAY FROM LUDHIANA AND THEREFORE THE ASSESSEE REQUESTED TO AO TO ISSUE THE COMMISSION. HOWEVER THE AO AFTER APPRECIATING THE COMPLETE DOCUMENTARY EVIDENCES PLACED ON RECORD AND APPLYING HIS MIND TO THE FACTS OF THE CASE, ACCEPTED THE EVIDENCES FILED BY THE ASSESSEE AND HAD TAKEN A POSSIBLE VIEW. THE AFORESAID FACTS ARE CLEA R FROM THE LETTER DT. 08/11/2017 WRITTEN BY THE ASSESEE TO THE LD. PR. CI T COPY OF WHICH IS PLACED AT PAGE NO. 498 & 499 OF THE ASSESSES COMPILATION. 9.1 WE, THEREFORE, BY CONSIDERING THE TOTALITY OF T HE FACTS AS DISCUSSED HEREINABOVE ARE OF THE VIEW THAT THE LD. PR. CIT WA S NOT JUSTIFIED IN EXERCISING HIS POWERS UNDER SECTION 263 OF THE ACT AND CONSIDERING THE ASSESSMENT ORDER DT. 27/12/2016 PASSED BY THE AO AS ERRONEOUS AND PREJUD ICIAL TO THE INTEREST OF THE REVENUE, THE SAME IS QUASHED AND THE ASSESSMENT ORD ER PASSED BY THE AO DT. 27/12/2016 IS RESTORED. 10. IN THE RESULT, APPEAL OF THE ASSESSEE IS ALLOWE D. (ORDER PRONOUNCED IN THE OPEN COURT ON 19/04/2021 ) SD/- SD/- .. .., (R.L. NEGI ) ( N.K. SAIN I) $ %&/ JUDICIAL MEMBER ! / VICE PRESIDENT AG DATE: 19/04/2021 (+! ,-.- COPY OF THE ORDER FORWARDED TO : 1. THE APPELLANT 2. THE RESPONDENT 3. $ / CIT 4. $ / 01 THE CIT(A) 5. -2 45&456789 DR, ITAT, CHANDIGARH 6. 8:% GUARD FILE