M/s Bisakha Sales Pvt Ltd, Kolkata V. C.I.T kolkata - II, Kolkata

ITA 1493/KOL/2013

• Counselvise Citation: [2014] 140 COUNSELVISE.COM (IT) 83127 (ITAT-KOLKATA)
• Duration Of Justice: 1 year(s) 3 month(s) 27 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 19-09-2014
• Appeal Filed By: Assessee
• Order Result: Dismissed
• Bench Allotted: C
• Assessment Year: 2008-2009
• Appeal Filed On: 23-05-2013
• Result in Favour of: Revenue
• Court: TRIBUNAL
• Department Lawyers: AJOY KR SINGH PE
• Assessee Lawyers: SANJAY BHOUMIK; J P KHAITAN SR R K KANKARIA
• Keywords: Reopening of assessment; Bogus Share capital; Gift; Revision of order; Principle of natural justice; Period of limitation; Question of law; Tangible material; Fair market value; Accommodation entries; Assessment record; Right to appeal; Capital receipt; Onus to prove; Reason to believe; Reassessment proceedings
• Section: 143(3); 54F; 142(1); 68; 263

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL C BENCH: KOL KATA [BEFORE SHRI SHAMIM YAHYA, A.M. & SHRI GEORGE MATHA N, J.M. ] I.T.A. NO.1493/KOL/2013 ASSESSMENT YEAR : 2008-09 M/S. BISAKHA SALES PVT. LTD.,KOLKATA (PAN: AADCB 0527F) .. ( APPELLANT ) -VS- CIT(KOL.-II), KOLKATA .. ( RESPONDENT ) DATE OF CONCLUDING THE HEARING : 11.09.2014 DATE OF PRONOUNCING THE ORDER : 19.09.2014 APPEARANCES : FOR THE APPELLANT : S/SHRI J.P .KHAITAN, SR.COUNSEL R.K.KANKARIA, FCA & SANJAY BHOUMIK, ADVOCATE : FOR THE RESPONDENT : SHRI AJOY KR.SINGH , CIT(DR), O R D E R PER SHRI GEORGE MATHAN,J.M. THIS IS AN APPEAL FILED BY THE ASSESSEE AGAINST THE ORDER OF THE LD. CIT-II, KOLKATA PASSED UNDER SECTION 263 OF THE INCOME-TAX ACT DATED 28 TH MARCH, 2013 FOR THE ASSESSMENT YEAR 2008-09. 2. SHRI J. P. KHAITAN, SR. COUNSEL REPRESENTED ON B EHALF OF THE ASSESSEE AND SHRI AJOY KR. SINGH, CIT(DR) REPRESENTED ON BEHALF OF THE REVENUE. 4. IT WAS SUBMITTED BY THE LD. SR. COUNSEL, REPRESE NTING ON BEHALF OF THE ASSESSEE, THAT THE LD. CIT HAD INVOKED HER POWERS U NDER SECTION 263 ON THE GROUND THAT THE AO DID NOT MAKE PROPER INQUIRY REGARDING T HE SHARE CAPITAL. IT WAS A SUBMISSION THAT THE ASSESSEE HAD FOR THE RELEVANT A SSESSMENT YEAR FILED ITS RETURN OF INCOME ON 16.05.2008. AS THE ASSESSEE DID NOT RECEI VE THE INTIMATION UNDER SECTION 143(1), THE ASSESSEE HAD FILED A LETTER DATED 11.12 .2009 TO THE AO REQUESTING FOR A COPY OF THE INTIMATION UNDER SECTION 143(1). THIS H AS BEEN SHOWN AT PAGE 26 OF THE PAPER BOOK. IT WAS A FURTHER SUBMISSION THAT ON 15. 12.2009, NOTICE UNDER SECTION ITA NO.1493/KOL/2013 BISAKHA SALES PVT. LTD. ASSESSMENT YEAR: 2008 -09 2 148 WAS ISSUED, WHICH WAS SHOWN AT PAGE 27 OF THE P APER BOOK. THE ASSESSEE HAD FILED A REPLY ON 17.12.2009. IT WAS A SUBMISSION TH AT NOTICE UNDER SECTION 143(2) WAS ISSUED ON 19.02.2010 AND ANOTHER NOTICE UNDER S ECTION 142(1) ON 24.02.2010 SHOWN AT PAGE 30 OF THE PAPER BOOK. IT WAS A SUBMIS SION THAT IN SERIAL NO.3 OF THE NOTICE UNDER SECTION 142(1), THE AO HAD SPECIFICALL Y ASKED THE ASSESSEE TO SHOW CAUSE WHY THE AMOUNT INCREASED ON ACCOUNT OF THE SH ARE APPLICANTS SHOULD NOT BE ADDED UNDER SECTION 68 OF THE ACT. IT WAS A SUBMISS ION THAT THE ASSESSEE HAD REPLIED BY A LETTER ON 08.03.2010 SHOWN AT PAGE 31 OF THE PAPER BOOK, WHEREIN IN PARA 3 OF THE REPLY, THE ASSESSEE HAD PROVIDED ALL THE INFORMATION IN RESPECT OF THE SHARE APPLICATION MONEY RECEIVED BY THE ASSESSEE. I T WAS A SUBMISSION THAT FROM PAGE 37 OF THE PAPER BOOK WAS THE LIST OF THE SHARE APPLICATION MONEYS RECEIVED ALONG WITH THE DETAILS OF THE PREMIUM, ETC. IT WAS A SUBMISSION THAT THE ASSESSMENT ORDER WAS PASSED UNDER SECTION 143 R.W.S. 147 ON 05 .04.2010. IT WAS A FURTHER SUBMISSION THAT IN THE SHOW CAUSE NOTICE ISSUED UND ER SECTION 263, THE LD. CIT HAD RAISED TWO ISSUES, ONE WAS THE ISSUE OF PREMIUM ON SHARES AND THE SECOND WAS THE ISSUE OF NO PROPER INQUIRY BY THE AO. IT WAS A SUBM ISSION THAT THE ASSESSEE IS A PRIVATE LIMITED COMPANY AND THE PROVISION OF SECTIO N 56(2)(VIIB) WAS INTRODUCED TO THE INCOME-TAX ACT W.E.F. 01.04.2013 AND CONSEQUENT LY BEFORE SUCH DATE, THE ISSUE OF THE SHARES AT A PREMIUM WAS NOT AN ISSUE O N WHICH ANY RELEVANT INQUIRY COULD HAVE BEEN MADE. 4.1 THE LD. SR. COUNSEL FURTHER DREW OUR ATTENTION TO THE ORDER PASSED UNDER SECTION 263 BY THE LD. CIT TO SUBMIT THAT THE LD. C IT HAD IN HIS ORDER PASSED UNDER SECTION 263 GENERALISED THE CONCEPT AND HAD APPLIED SUCH GENERAL CONCEPTS TO THE FACTS OF THE ASSESSEES CASE FOR THE PURPOSE OF SET TING ASIDE THE ASSESSMENT ORDER ORIGINALLY PASSED BY THE AO ON 05.04.2010. IT WAS A SUBMISSION THAT THE AO HAD SPECIFICALLY RAISED INQUIRIES ON THE ISSUE OF SHARE APPLICATION MONEY. THE ASSESSEE HAD REPLIED TO THE SAME ALONG WITH THE EVIDENCE AND THE AO WAS SATISFIED WITH THE REPLY AND THEREFORE DID NOT DEEM IT NECESSARY TO MA KE ANY FURTHER VERIFICATION. IT WAS A FURTHER SUBMISSION THAT IN THE ORDER PASSED U NDER SECTION 263, THE DIRECTION ITA NO.1493/KOL/2013 BISAKHA SALES PVT. LTD. ASSESSMENT YEAR: 2008 -09 3 GIVEN UNDER THE SECOND AND THIRD CLAUSES HAD NO REL EVANCE TO THE ORDER UNDER APPEAL IN SO FAR AS SUCH DIRECTIONS WERE IN RESPECT OF CHANGE IN THE DIRECTORSHIP AND THE CONTROLLING INTEREST IN THE COMPANY AS ALSO SOURCE OF REALIZATION FROM THE LIQUIDATION OF THE ASSETS. IT WAS A SUBMISSION THAT BOTH DID NOT OCCUR DURING THE RELEVANT ASSESSMENT YEAR AND IN THE RELEVANT ASSESS MENT YEAR ONLY THE CAPITAL HAD BEEN RAISED. IT WAS A SUBMISSION THAT THE ASSESSMEN T YEAR 2008-09 WAS THE SECOND YEAR, AFTER THE INCORPORATION OF THE ASSESSEES COM PANY. IT WAS THUS THE SUBMISSION OF THE LD. SR. COUNSEL THAT THE ISSUES IN THE APPEA L COULD BE CRYSTALLIZED INTO FOUR ISSUES, (I) BEING THAT THE AO HAD MADE SUCH INQUIRY AS THE FACTS OF THE CASE WARRANTED AND THE CIT HAD FOUND NO FAULT OF THE AO TO SHOW THAT THE AO HAS NOT MADE PROPER INQUIRY, (II) THE CIT COULD HAVE MADE T HE INQUIRY HERSELF TO SHOW HOW THE ORDER IS ERRONEOUS AND (III) HOLDING THE ORDER ERRONEOUS ON A GENERALIZED BACKGROUND STATEMENT FOR WHICH THERE IS NO MATERIAL ON RECORD IS UNSUSTAINABLE. THE LD. AR FURTHER PLACED RELIANCE ON THE FOLLOWING DECISIONS OF VARIOUS HONBLE HIGH COURTS AND THE TRIBUNAL. 1) 354 ITR 35 (AP) AT PARA 59 SPECTRA SHARES & SCRIPS PVT. LTD. 2) 357 ITR 388 (DEL) AT PARA 5- DIT-VS- JYOTI FOUND ATION 3) 68 TAXMANN 215 (CAL) AT PARA 13 & 14 MULCHAN D BAGRI 4) LOTUS CAPITAL FINANCIAL SERVICES, BEING THE DECI SION OF THE COORDINATE BENCH OF THIS TRIBUNAL IN ITA NO.479/KOL /2011 DATED 21.11.2011 ON WHICH THE APPEAL HAS BEEN DISMISSED B Y THE HONBLE JURISDICTIONAL HIGH COURT IN GA NO.1507/2012 DATED 16.07.2012 4.2 THE FOURTH ISSUE BEING THERE WAS NO TANGIBLE MA TERIAL FOR THE PURPOSE OF INVOKING THE POWERS UNDER SECTION 263 FOR WHICH PRO POSITION, THE DECISION OF THE HONBLE BOMBAY HIGH COURT IN THE CASE 323 ITR 206 A T PARA 210 WAS RELIED UPON. IT WAS A SUBMISSION THAT THE HONBLE SUPREME COURT IN MALABAR INDUSTRIES REPORTED IN 243 ITR 83 HAS ALSO HELD THAT THERE SHO ULD BE SOME TANGIBLE MATERIAL FOR THE PURPOSE OF TREATING AN ORDER AS ERRONEOUS A ND PREJUDICIAL TO THE INTEREST OF REVENUE. IT WAS A FURTHER SUBMISSION THAT THE ISSUE ON THE SHARE CAPITAL WAS NOW ITA NO.1493/KOL/2013 BISAKHA SALES PVT. LTD. ASSESSMENT YEAR: 2008 -09 4 SETTLED IN SO FAR AS THE HONBLE SUPREME COURT IN T HE CASE OF LOVELY EXPORTS REPORTED IN 216 CTR 195(SC) HAS UPHELD THE ISSUE TH AT IF THE DETAILS OF THE SHARE APPLICANTS ARE PROVIDED THEN NO ADDITION ON ACCOUNT OF THE SHARE APPLICATION MONEY WAS LIABLE TO BE MADE IN THE HANDS OF THE ASSESSEE COMPANY. IT WAS A FURTHER SUBMISSION THAT THE LD. CIT HAS REFERRED TO THE DEC ISION OF THE HONBLE DELHI HIGH COURT IN THE CASE OF NOVA PROMOTERS AND FINLEASE (P ) LTD. REPORTED IN 342 ITR 169 (DELHI). IT WAS A SUBMISSION THAT THE FACTS IN THE SAID CASE WERE COMPLETELY DIFFERENT FROM THE FACTS IN THE ASSESSEES CASE. IT WAS A SUBMISSION THAT FACTS AS MENTIONED IN PARA 39 OF THE ORDER IN NOVA PROMOTERS AND FINLEASE (P) LTD. ( SUPRA ) WAS IN NO WAY IDENTICAL TO THE FACTS OF THE ASSESSE ES CASE. IT WAS A SUBMISSION THAT THE COMMISSIONER HAD RELIED UPON THE DECISION OF TH E ACTIVE TRADERS PVT. LTD. REPORTED IN 214 ITR 583. IT WAS A SUBMISSION THAT T HIS DECISION WAS DISTINGUISHABLE IN SO FAR AS IN ACTIVE TRADERS ENQUIRY WAS NOT TAKE N TO ITS LOGIC END WHEREAS IN THE ASSESSEES CASE, THE AO HAD CONDUCTED INQUIRY AND W AS SATISFIED WITH THE REPLIES GIVEN BY THE ASSESSEE. IT WAS A SUBMISSION THAT THE DECISION IN THE CASE OF NIVEDITA VANIJYA NIYOJAN LTD. RELIED UPON BY THE CIT IN 263 ITR 623(CAL) WAS ON ITS OWN SET OF FACTS IN SO FAR AS IN THAT CASE THE ASSESSEE DID NOT PRODUCE ALL SHAREHOLDERS AS CALLED FOR BY THE AO, WHEREAS IN THE ASSESSEES CAS E, THE AO DID NOT FEEL THE NECESSITY TO CALL FOR THE SHAREHOLDERS AT ALL. IT W AS A FURTHER SUBMISSION THAT THE PROVISIONS OF SECTION 56(2)(VIIA) ARE PROSPECTIVE I N NATURE AND IT IS TO BE READ WITH SECTION 2(24)(XVI). 4.3 ON A SPECIFIC QUERY FROM THE BENCH AS TO THE IM PLICATION OF THE PROVISO TO THE SECTION 68, WHICH SPECIFIES THAT THE ASSESSEE I S TO PROVE THE SOURCE OF THE SOURCE ALSO IN RESPECT OF THE SHARE APPLICANTS AND SHARE P REMIUM, THE ASSESSEES SUBMISSION WAS THAT THE SAID PROVISO WAS ALSO PROSP ECTIVE IN OPERATION W.E.F. 01.04.2013. IT WAS A SUBMISSION THAT THE SAID PROVI SO WAS EXPLAINING THE DEEMING FICTION OF SECTION 68 AND IT COULD NOT BE HELD TO B E RETROSPECTIVE. IT WAS THUS THE SUBMISSION THAT THE ORDER PASSED UNDER SECTION 263 WAS LIABLE TO BE QUASHED. ITA NO.1493/KOL/2013 BISAKHA SALES PVT. LTD. ASSESSMENT YEAR: 2008 -09 5 5. IN REPLY, THE LD. CIT,DR SUBMITTED, AT THE OUTSE T, THAT THE DECISIONS RELIED UPON BY THE LD. A.R., APPEARING ON BEHALF OF THE AS SESSEE, WERE DISTINGUISHABLE IN ITS ENTIRETY. IT WAS A SUBMISSION THAT THE DECISION IN THE CASE OF LOTUS CAPITAL FINANCIAL SERVICES, THE ASSESSEE HAD PROVIDED THE C OMPLETE DETAILS. IT WAS A SUBMISSION THAT IN ASSESSEES CASE, ONLY PART OF TH E DETAILS HAD BEEN PROVIDED AND THE DETAILS WHATEVER HAD BEEN PROVIDED ITSELF WERE INCOMPLETE. IT WAS A SUBMISSION THAT THE BANK ACCOUNT DETAILS PROVIDED WERE ONLY FO R ONE OR TWO MONTHS AND THE ENTIRE TRANSACTION WAS NOT PRODUCED TO SHOW THE CAS H TRANSACTION WHICH HAD BEEN DONE INITIALLY. ALSO NO ENQUIRY WORTH ITS NAME WAS ALSO DONE. IT WAS A SUBMISSION THAT IN LESS THAN FOUR MONTHS, 148 PROCEEDING HAD B EEN COMPLETED, WHICH ITSELF CREATES A DOUBT IN REGARD TO THE VERACITY OF THE PR OCEEDINGS ITSELF. IT WAS A SUBMISSION THAT THE DECISION OF THE HONBLE CALCUTT A HIGH COURT IN THE CASE OF ACTIVE TRADERS 214 ITR 583 WAS MORE APPLICABLE TO T HE FACTS OF ASSESSEES CASE IN SO FAR AS NO INQUIRY HAD BEEN DONE TO TAKE A CONSID ERED VIEW IN THE COURSE OF ASSESSMENT PROCEEDINGS THEN THE COMMISSIONER WAS EN TITLED TO INVOKE HER POWERS UNDER SECTION 263. IT WAS A SUBMISSION THAT CONSEQU ENTIAL ORDERS TO THE ORDER PASSED UNDER SECTION 263 HAD ALSO BEEN PASSED AND T HERE WAS ABSOLUTELY NO COMPLIANCE FROM THE ASSESSEES SIDE IN THE COURSE O F THE CONSEQUENTIAL ASSESSMENT. THE LD. DR FURTHER DREW OUR ATTENTION TO THE DECISI ON OF THE HONBLE KARNATAKA HIGH COURT IN THE CASE OF INFOSYS LTD. REPORTED IN 341 ITR 293 TO SUBMIT THAT PROVISION OF SECTION 263 WAS INTENDED TO PLUG LEAKA GES TO THE REVENUE BY REVIEWING ORDERS PASSED BY THE LOWER AUTHORITIES, W HETHER BY MISTAKE OR IN IGNORANCE OR EVEN BY DESIGN. IT WAS A SUBMISSION TH AT IN THE PRESENT CASE, THESE WERE BY DESIGN. THE LD. DR FURTHER DREW OUR ATTENTI ON TO PAGE 31 OF THE PAPER BOOK, WHICH WAS A COPY OF THE REPLY FILED BY THE AS SESSEE, IN REPLY TO THE NOTICE UNDER SECTION 142(1). IT WAS A SUBMISSION THAT BELO W SIGNATURE OF THE DIRECTOR, A DATE 08.03.2010 HAS BEEN WRITTEN. THIS DATE IS NOT FOUND IN THE LETTER, WHICH IS FOUND IN THE ASSESSMENT RECORDS. IT WAS A FURTHER S UBMISSION THAT A PERUSAL OF THE ORDER-SHEET RECORDS CLEARLY SHOWS THAT THE AO HAS B EEN RECORDING IN THE ORDER- SHEET THE LETTERS WHICH HAVE BEEN FILED BY THE ASSE SSEE BUT THIS LETTER, IN RESPONSE TO ITA NO.1493/KOL/2013 BISAKHA SALES PVT. LTD. ASSESSMENT YEAR: 2008 -09 6 THE NOTICE UNDER SECTION 142(1) ALONG WITH THE DETA ILS FILED WITH THE LETTER, ITSELF HAS NO MENTION WHATSOEVER IN THE ORDER-SHEET NOTINGS. I T WAS ALSO A REFERENCE MADE BY THE LD. DR THAT EVEN THE LETTER-HEAD OF THE LETTER ALLEGED TO HAVE BEEN FILED ON 08.03.2010 WAS DIFFERENT FROM THE EARLIER LETTER-HE ADS FILED A FEW MONTHS EARLIER. 5.1 THE LD. DR PLACED BEFORE US COPY OF ORDER-SHEET NOTING. IT WAS A SUBMISSION THAT WHEN THE ASSESSEE HAS FILED ANY LETTER BEFORE THE AO, THE AO HAS INVARIABLY NOTED THE FILING OF SUCH LETTER IN THE ORDER-SHEET. HOWEVER, THERE IS NO MENTION WHATSOEVER OF THE SO-CALLED LETTER ALLEGED TO HAVE BEEN FILED ON 08.03.2010. IT WAS A FURTHER SUBMISSION THAT A PERUSAL OF THE ASSESSME NT RECORDS ALSO CLEARLY SHOWS THAT AN ORDER UNDER SECTION 143(1) HAD BEEN PASSED ON 07.10.2009. THE UNDATED LETTER OF THE ASSESSEE INTIMATING THE NON-RECEIPT O F THE INTIMATION UNDER SECTION 143(1) IS FILED ON 11.12.2009. THE ASSESSMENT RECOR D HAS ONLY ONE COPY OF THE INTIMATION DATED 07.10.2009. THUS, THE PRESUMPTION IS THAT THE SECOND COPY OF INTIMATION UNDER SECTION 143(1) HAD BEEN SERVED ON THE ASSESSEE. IT WAS A SUBMISSION THAT THE LETTER FILED ON 11.12.2009 IS, IN FACT, JUST A GARB TO LET THE AO INITIATE PROCEEDINGS UNDER SECTION 148 FOR THE PURP OSE OF GETTING THE SEAL OF APPROVAL UNDER THE GARB OF SCRUTINY ASSESSMENT IN R ESPECT OF GENUINENESS OF THE SHARE CAPITAL INTRODUCED. IT WAS A SUBMISSION THAT NO INDEPENDENT INQUIRY WHATSOEVER HAD BEEN CONDUCTED BY THE AO. EVEN THE S O-CALLED BANK STATEMENTS SUBMITTED IN RESPECT OF SHARE APPLICANTS WERE INCOM PLETE. 5.2 THE LD. CIT,DR FURTHER SUBMITTED THAT THERE HAS BEEN A TOTAL VIOLATION OF THE PROVISIONS OF SECTION 78 OF THE COMPANIES ACT IN SO FAR AS SECTION 78 SPECIFIES AS TO HOW SHARE PREMIUM IS TO BE USED. IT WAS A SUBMIS SION THAT PENDING ALLOTMENT OF THE SHARES, AMOUNT MUST BE KEPT IN THE BANK. THE LD . DR DREW OUR ATTENTION TO THE PAPER BOOK FILED ON BEHALF OF THE ASSESSEE TO SUBMI T THAT THE SHARES HAD BEEN ALLOTTED TO THE APPLICANTS ONLY ON 31.03.2008 IN AL L THE CASES BUT THE FUNDS HAVE BEEN USED FOR MAKING FURTHER INVESTMENTS IN THE SHA RE APPLICATION OF OTHER SUCH COMPANIES IMMEDIATELY ON RECEIPT OF THE FUNDS. IT W AS A SUBMISSION THAT EVEN THE CHARTERED ACCOUNTANT, WHO HAS AUDITED THESE COMPANI ES, WERE THE SAME AND THE ITA NO.1493/KOL/2013 BISAKHA SALES PVT. LTD. ASSESSMENT YEAR: 2008 -09 7 SAID C.A. HAS AUDITED THE ACCOUNTS OF MORE THAN THE PRESCRIBED NUMBER OF COMPANIES. IN RESPECT OF 263 ORDER PASSED, THE LD. CIT,DR FURTHER PLACED RELIANCE ON THE DECISION OF THE HONBLE KERALA HIGH COURT IN THE CASE OF APOLLO TYRES LTD. IN ITA NO.196 OF 2013 WHEREIN THE HONBLE HIGH COUR T, BY AN ORDER DATED 17.10.2013, HAS HELD AS FOLLOWS: 3. THIS ORDER OF THE COMMISSIONER WAS CHALLENGED BEFORE TRIBUNAL, WHO CONFIRMED THE ORDER OF THE COMMISSIONER BY ORDE R DATED 8.2.2013. AGGRIEVED BY THIS, THE APPELLANT ASSESSEE IS BEFORE US. 4. ACCORDING TO LEARNED SENIOR COUNSEL, COMMISSION ER FAILED TO APPRECIATE THAT THE ASSESSING OFFICER DID CONSIDER THE SPECIFIC NINE POINTS RAISED UNDER SECTION 263 OF THE ACT, THEREFO RE, THERE WAS NOTHING WHICH COULD BE TERMED AS ERRONEOUS CONSIDER ATION ON THE PART OF THE ASSESSING OFFICER, AS THE ASSESSING OFF ICER IS NOT REQUIRED TO MAKE ROVING ENQUIRY INTO EACH AND EVERY ISSUE CONCERNED, ITEM- WISE WHILE ACCEPTING THE RETURNS OF THE ASSESSEE. O N PERUSAL OF RECORDS, WE NOTICE THAT THE ORDER OF THE COMMISSION ER PASSED UNDER SECTION 263 OF THE ACT IS A DETAILED ITA.196/ 13 ORDER DISCUSSING EACH OF THE NINE POINTS RAISED BY THE RE VISIONAL AUTHORITY. TRIBUNAL, AFTER REFERRING TO DECISION OF BOMBAY HIGH COURT IN THE CASE OF GRASIM INDUSTRIES LTD. V. CIT (321 ITR 92), ANALYSED WHAT EXACTLY WOULD MEAN PREJUDICE TO THE I NTEREST OF REVENUE AND HOW AN AUTHORITY EXERCISING POWERS UNDE R SECTION 263 OF THE ACT HAS TO PROCEED IN THE MATTER. ULTIMA TELY, FOLLOWING THE DECISION OF APEX COURT IN MALABAR INDUSTRIAL CO . LTD. V. CIT [(2000)243 ITR 83], TRIBUNAL ALSO CONFIRMED THE OPI NION OF THE COMMISSIONER THAT THERE WAS NO APPLICATION OF MIND WHILE CONSIDERING THE ASSESSMENT UNDER SECTION 143(3) OF THE ACT, THEREFORE, IT IS NOT ONLY ERRONEOUS, BUT ALSO, PREJ UDICIAL TO THE INTEREST OF REVENUE. OPINING THAT THE PROCEDURE ADO PTED DEFINITELY WOULD HAVE IMPLICATION ON THE TAX COMPUTATION WHICH ULTIMATELY CAUSES PREJUDICE TO THE REVENUE, TRIBUNAL CONFIRMED THE ORDERS OF THE COMMISSIONER UNDER SECTION 263 OF THE ACT. 5. HAVING REGARD TO REASONING OF THE TRIBUNAL, WE A FFIRM THE OPINION OF TRIBUNAL THAT THE FRESH CONSIDERATION OF THE MATTER BY THE ASSESSING AUTHORITY IN THE LIGHT OF OBSERVATION S OF REVISIONAL AUTHORITY HAS TO BE MADE AFRESH UNTRAMMELLED BY ANY OF THE OBSERVATIONS MADE BY THE AUTHORITIES CONCERNED.ITA. 196/13. ITA NO.1493/KOL/2013 BISAKHA SALES PVT. LTD. ASSESSMENT YEAR: 2008 -09 8 WE FIND NO GOOD GROUND TO INTERFERE WITH THE OPINI ON OF THE AUTHORITIES CONCERNED. HENCE, THE APPEAL IS DISMISS ED. MANJULA CHELLUR, CHIEF JUSTICE, A.M. SHAFFIQUE, JUDGE 5.3 HE FURTHER PLACED RELIANCE UPON THE DECISION OF THE HONBLE KARNATAKA HIGH COURT IN THE CASE OF INFOSYS TECHNOLOGIES LTD. TO S UBMIT THAT IT WAS ALWAYS OPEN TO THE ASSESSEE TO JUSTIFY THE CLAIM OF THE SHARE CAPI TAL BEFORE THE AO. IT WAS A SUBMISSION THAT THERE IS NO FINDING OF THE LD. CIT IN THE 263 ORDER DIRECTING THAT THE SHARE CAPITAL SHOULD BE DISALLOWED FOR ADDED AS THE UNDISCLOSED INCOME OF THE ASSESSEE. IT WAS SUBMISSION THAT THERE IS NO PREJUD ICE TO THE ASSESSEE. IT WAS A SUBMISSION THAT THE DECISION OF THE COORDINATE BENC H OF THIS TRIBUNAL IN THE CASE OF STAR GRIHA IN ITA NO.1244 OF 2013 FOR THE ASSESS MENT YEAR 2008-09 DATED 14 TH AUGUST, 2014 APPLIED IN THE ASSESSEES CASE ALSO IN SO FAR AS MANY OF THESE COMPANIES ARE UNDER INVESTIGATION BY THE MINISTRY O F CORPORATE AFFAIRS AS WELL AS CBI, ED AND SIT. IT WAS A SUBMISSION THAT IN THE CA SES OF POLITICALLY EXPOSED, ALSO INVESTIGATIONS ARE AT A CRITICAL LEVEL. IT WAS A SU BMISSION THAT THOUGH THE LD. CIT IN SOME CASES HAS DROPPED PROCEEDINGS INITIATED UNDER SECTION 263 IN SOME CASES, IT DID NOT PRECLUDE THE AO FROM INITIATING PROCEEDINGS UNDER SECTION 147/148 FOR REOPENING OF THE ASSESSMENT. IT WAS A SUBMISSION TH AT THE TIME FOR SUCH REOPENING WAS ALSO AVAILABLE. IT WAS A SUBMISSION THAT THE OR DER OF THE LD. CIT PASSED UNDER SECTION 263 WAS LIABLE TO BE UPHELD. 6. IN REPLY, THE LD. SR. COUNSEL, APPEARING ON BEHA LF OF THE ASSESSEE, PLACED BEFORE US A COPY OF THE LETTER WRITTEN BY SHRI R.K. KANKARIA, CHARTERED ACCOUNTANT EXPLAINING HOW THE DATE 08.03.2010 APPEARED ON THE LEFT HAND BOTTOM OF THE DOCUMENT SUBMITTED AT PAGE 31 OF THE ASSESSEES PAP ER BOOK, WHICH IS EXTRACTED HEREINBELOW. 11.09.2014 THE HON'BLE MEMBERS, INCOME TAX APPELLATE TRIBUNAL, 'C' BENCH KOLKATA. ITA NO.1493/KOL/2013 BISAKHA SALES PVT. LTD. ASSESSMENT YEAR: 2008 -09 9 REF: ITA NO.1493/KOL/2013 IN THE MATTER OF BISAK HA SALES P.LTD. VS. CIT, KOL-II, KOLKATA RESPECTED SIRS, THIS IS TO PLACE ON RECORD THAT IN COURSE OF THE H EARING ON SEPTEMBER 9, 2014, A QUESTION AROSE WITH REGARD TO THE DATE ' 8.3.2010' APPEARING AT THE LEFT HAND BOTTOM OF THE DOCUMENT AT PAGE 31 OF THE ASSESSEE'S PAPER BOOK WHERE IT WAS DULY EXPLAINED BY ME THAT T HE SAID DOCUMENT DID NOT CARRY ANY DATE AND THAT IT WAS IDENTIFIED A S HAVING BEEN FILED BEFORE THE ASSESSING OFFICER ON '8.3.2010' UPON CHE CKING WITH THE CERTIFIED COPY OF THE ORDER SHEET WHICH DATE WAS NO TED IN PENCIL ON A COPY THEREOF AND THAT DUE TO OVERSIGHT SUCH COPY WI TH SUCH PENCIL WRITTEN DATE '8.3.2010' CAME TO BE USED FOR PREPARI NG THE PAPER BOOKS FILED BEFORE THIS HON'BLE TRIBUNAL. IN COURSE OF TH E HEARING, I HAD ALSO PLACED BEFORE THE HON'BLE BENCH THE CERTIFIED COPY OF THE DOCUMENT AT PAGE 31 AS OBTAINED FROM THE ASSESSING OFFICER, WHI CH DID NOT CARRY ANY DATE, AS 'ALSO THE COPY OF THE CERTIFIED COPY W ITH THE AFORESAID PENCIL WRITING. IF SO REQUIRED I MAY BE GRANTED LEA VE TO FILE AN AFFIDAVIT STATING THE AFORESAID FACTS ON OATH. AND FOR THIS ACT OF KINDNESS, I SHALL EVER REMAIN G RATEFUL. THANKING YOU, YOURS FAITHFULLY, SD/- (R.K.KANKARIA) AUTHORISED REPRESENTATIVE. 6.1 IT WAS A SUBMISSION BY THE LD. SR. COUNSEL THAT THE AO HAD CALLED FOR AN EXPLANATION IN RESPECT OF SHARE CAPITAL IN THE NOTI CE UNDER SECTION 142(1). REPLY HAD BEEN GIVEN THAT THE ASSOCIATED SHAREHOLDERS ARE INCOME-TAX ASSESSEES AND THEY HAVE ALSO EXPLAINED THE SOURCE OF THE FUND AS ALSO THE RELEVANT BANK EXTRACTS WERE PRODUCED. AFTER VERIFYING THE REPLY FILED BY THE AS SESSEE, THE AO HAD FELT THAT HE DID NOT NEED TO DO ANY FURTHER INQUIRY. POSSIBLY, B ECAUSE OF THIS, THE AO DID NOT DO ANY FURTHER INQUIRY ALSO. IT WAS A SUBMISSION THAT THE LD. CIT WAS LIABLE TO DEMONSTRATE, WHILE MAKING THE INQUIRY AS TO WHERE T HE AO HAS COMMITTED THE ERROR, WHICH IS PREJUDICIAL TO THE INTEREST OF REVE NUE. IT WAS A SUBMISSION THAT THIS ITA NO.1493/KOL/2013 BISAKHA SALES PVT. LTD. ASSESSMENT YEAR: 2008 -09 10 HAD NOT BEEN DONE BY THE LD. CIT. THE LD. CIT HAS P ASSED THE ORDER UNDER SECTION 263 ONLY ON PRESUMPTION AND ASSUMPTION. 6.2 THE LD. SR. COUNSEL FURTHER PLACED RELIANCE ON THE DECISION OF THE HONBLE JURISDICTIONAL HIGH COURT IN THE CASE OF J.L.MORRIS ON REPORTED IN 366 ITR 593. IT WAS A SUBMISSION THAT IN THE SAID DECISION THE PRIN CIPLE LAID DOWN WAS THAT WHEN THE RECORD SHOWS THAT THE INQUIRY WAS MADE BY THE A O THEN REVISION DOES NOT LIE. IT WAS A FURTHER SUBMISSION THAT THE REVENUE WAS ATTEM PTING TO SUPPORT AN UNSUPPORTABLE ORDER UNDER SECTION 263 BY TAKING THE RECOURSE TO EXTERNAL GROUND. IT WAS A FURTHER SUBMISSION THAT THE ORDER UNDER SECTI ON 263 MUST STAND ON ITS OWN AS HAS BEEN HELD BY THE HONBLE CALCUTTA HIGH COURT IN THE CASE OF CIT -VS- HOWRAH FLOUR MILLS LTD. REPORTED IN 236 ITR 156. IT WAS A FURTHER SUBMISSION THAT THE SCOPE OF THE AMENDMENT TO SECTION 68 BY INTRODUCTIO N OF THE PROVISO THERETO IS AS PER THE NOTES ON THE CLAUSES AND THE MEMORANDUM EXP LAINING THE CLAUSES TO OPERATE FROM THE ASSESSMENT YEAR 2013-14. THE LD. S R. COUNSEL DREW OUR ATTENTION TO 342 ITR STATUTE 55 & 56 AT CLAUSES 21 AND 22 OF THE BILL AS ALSO THE NOTES TO THE CLAUSES AS STATUTE PAGES 159 AND 160 AND THE MEMORA NDUM EXPLAINING THE CLAUSES AT STATUTE PAGES 242,244 AND 247. 6.3 THE LD. A.R. FURTHER PLACED BEFORE US COPY OF T HE APPEAL FILED BY THE ASSESSEE BEFORE THE LD. CIT(A) AGAINST THE CONSEQUE NTIAL ASSESSMENT ORDER PASSED AS CONSEQUENCE TO THE ORDER UNDER SECTION 263. IT W AS A SUBMISSION BY THE LD. SR. COUNSEL THAT THE DECISION OF THE BENCH OF THE HONB LE GAUHATI HIGH COURT IN THE CASE OF JAWAHAR BHATTACHARJEE REPORTED IN 241 ITR 4 34, REFERRED TO BY THE REVENUE, WAS DISTINGUISHABLE IN SO FAR AS IN THE AS SESSEES CASE WHAT WAS CALLED FOR BY THE AO WAS PROVIDED. IT WAS A FURTHER SUBMIS SION THAT THE DECISION OF THE HONBLE KARNATAKA HIGH COURT IN THE CASE OF INFOSYS TECHNOLOGIES LTD. WAS ON TOTALLY DIFFERENT FACTS AND IN RESPECT OF DECISION OF THE HONBLE DELHI HIGH COURT IN THE CASE OF BHAGWATI JEWELS LTD. REPORTED IN 201 IT R 461. THERE WAS NO DECISION ON THE ISSUE OF 263. ONLY THE HONBLE DELHI HIGH CO URT HAD HELD THAT THERE WAS A QUESTION OF LAW AND THE APPEAL WAS LIABLE TO BE ADM ITTED. IT WAS A SUBMISSION THAT ITA NO.1493/KOL/2013 BISAKHA SALES PVT. LTD. ASSESSMENT YEAR: 2008 -09 11 THE DECISION IN THE CASE OF ROSE VALLEY AND LOTUS C APITAL RELIED UPON BY THE ASSESSEE WAS APPLICABLE IN SO FAR AS THE ASSESSEE H AD PRODUCED ALL THE DETAILS AS CALLED FOR BY THE AO. IT WAS A FURTHER SUBMISSION T HAT THE DECISION OF THE COORDINATE BENCH OF THIS TRIBUNAL IN THE CASE OF ST AR GRIHA, REFERRED TO SUPRA , WAS NOT APPLICABLE, AS THE SAME WAS AN EX PARTE ORDER AND ON DIFFERENT FACTS. IT WAS ALSO THE SUBMISSION THAT THE VIOLATION OF ANY OF THE PRO VISIONS OF THE COMPANIES ACT, IF ANY, WILL NOT HAVE ANY IMPACT ON THE ASSESSMENT ORD ER PASSED BY THE AO IN SO FAR AS THE SAID VIOLATION WAS NOT AN ISSUE RAISED IN TH E ORDER ISSUED UNDER SECTION 263. IT WAS FURTHER A SUBMISSION THAT THE DECISION OF TH E HONBLE KERALA HIGH COURT IN THE CASE OF APOLLO TYRES ( SUPRA ) ALSO DID NOT APPLY IN SO FAR AS THE SAID DECISION WAS BASED ON THE FACTS OF THAT CASE. NOTE IN RESPEC T OF SECTION 78 OF THE COMPANIES ACT, AS CALLED FOR BY THE BENCH AND THE BALANCE-SHE ET AND PROFIT & LOSS A/C. FROM THE YEAR 31.03.2009 UPTO 31.03.2013 ALONG WITH THE SCHEDULES THERETO AND THE INCORPORATION CERTIFICATE OF THE COMPANY WERE ALSO PLACED BEFORE THE BENCH. 6.4 IN REGARD TO THE PROVISIONS OF SECTION 78 OF TH E COMPANIES ACT, SHRI R.K. KANKARIA HAS SUBMITTED A NOTE, WHICH READS AS FOLLO WS: 1. IT IS SUBMITTED THAT SHARE PREMIUM IS CAPITAL I N NATURE AND IS NOT A REVENUE RECEIPT. REFERENCE IN THIS BEHALF IS INVI TED TO THE FOLLOWING DECISIONS: - (I) ASIATIC OXYGEN LTD. V. DEPUTY COMMISSIONER OF INCOM E TAX, (1994) 49 ITD 355 (CAL). (II) DEPUTY COMMISSIONER OF INCOME TAX V. MAIPO IN DIA LTD., (2008) 24 SOT 42 (DEL). (III) BROOKE BOND INDIA LTD. V. C.I.T., (1997) 225 ITR 798 (SC) - WHERE IT WAS HELD THAT ISSUE OF SHARES AT A PREMIUM WAS DIRECTLY RELATED TO THE EXPANSION OF THE CAPITAL BASE OF THE COMPANY AND EXPENDITURE INCURRED FOR SUCH ISSUE WAS CAPITAL EXP ENDITURE. 2. IT IS FURTHER SUBMITTED THAT IN THE INSTANT CASE , THERE WAS NO CONTRAVENTION OF SECTION 78 OF THE COMPANIES ACT, 1 956. SUB-SECTION (1) OF SECTION 78 WAS DULY COMPLIED WITH BY TRANSFE RRING A SUM EQUAL TO THE PREMIUM TO 'SHARE PREMIUM ACCOUNT'. SUB-SECT ION (2) OF SECTION 78 PROVIDES FOR APPLICATION OF THE 'SHARE P REMIUM ACCOUNT' IN ITA NO.1493/KOL/2013 BISAKHA SALES PVT. LTD. ASSESSMENT YEAR: 2008 -09 12 THE MANNER SPECIFIED. THE ASSESSEE'S 'SHARE PREMIUM ACCOUNT' REMAINS INTACT. SUBMISSION ON BEHALF OF THE REVENUE THAT SECTION 78 REGULATES THE MANNER OF UTILISATION OF THE MONEY RE CEIVED BY WAY OF SHARE PREMIUM IS NOT BORNE OUT FROM THE SECTION. 7. WE HAVE CONSIDERED THE RIVAL SUBMISSIONS. A PERU SAL OF THE ORDER OF THE LD. CIT PASSED UNDER SECTION 263 SHOWS THAT ON THE BASI S OF SUBSTANTIAL INFORMATION AVAILABLE TO HER THAT THERE WERE NUMEROUS COMPANIES WHICH WERE CREATED WITH BOGUS SHARE CAPITAL FOR THE PURPOSE OF MONEY LAUNDE RING, THE LD. CIT HAS CALLED FOR THE RECORDS AND HAS, AFTER DUE VERIFICATION, ISSUED THE SHOW CAUSE NOTICE TO THE ASSESSEE. IT FURTHER SHOWS THAT THE LD. CIT, AFTER OBTAINING THE REPLIES FROM THE ASSESSEE AND DUE INQUIRY, HAS DRAWN A CONCLUSION TH AT THE ASSESSMENT ORDER PASSED UNDER SECTION 143(3) READ WITH SECTION 147 WAS ERRO NEOUS AND HENCE PREJUDICIAL TO THE INTEREST OF REVENUE. A PERUSAL OF THE ORDER OF THE LD. CIT FURTHER SHOWS THAT THERE ARE A NUMBER OF COMPANIES IN THIS REGARD, DOI NG THE BUSINESS OF MONEY LAUNDERING UNDER THE GUISE OF SHARE CAPITAL INTRODU CTION. 7.1 FACTS IN THE PRESENT CASE SHOW SOME OF THE PECU LIARITIES OF THE VARIOUS NUMBER OF CASES ON WHICH SUCH REVISION HAS BEEN DON E BY THE CIT. THERE ARE MORE THAN 500 APPEALS AGAINST SUCH 263 ORDERS AT THE CAL CUTTA BENCHES OF THIS TRIBUNAL. WE ARE GIVEN TO UNDERSTAND THAT MANY MORE ARE UNDER THE PROCESS OF REOPENING. THE PECULIARITIES OF THESE TYPE OF CASES ARE THAT A FTER THE RETURN IS FILED, UNDER THE GUISE OF A LETTER FROM THE ASSESSEE, THE AOS ATTEN TION IS DRAWN TO THIS FILE. THE AO ISSUES NOTICE UNDER SECTION 148 FOR SOME REASONS. I N THE COURSE OF THE REOPENED ASSESSMENT, ALLEGEDLY VARIOUS DOCUMENTS IN RESPECT OF SHARE CAPITAL INTRODUCTION ARE ALSO PLACED BEFORE THE AO AND THE ISSUE ON WHIC H THE REOPENING IS DONE IS PRACTICALLY ACCEPTED AS THE AMOUNTS INVOLVED FOR TH E PURPOSE OF REOPENING ARE VERY MEAGER. THE REASSESSMENT IS COMPLETED BY MAKING MIN OR ADDITIONS AND WITHOUT DOING ANY INVESTIGATION IN RESPECT OF SHARE CAPITAL INTRODUCED. ONE OF THE CONSPICUOUS PECULIARITIES IN THESE TYPE OF CASES AR E THAT FROM THE TIME OF ISSUING NOTICE UNDER SECTION 148 TO THE DATE OF THE COMPLET ION OF THE ASSESSMENT, THE WHOLE PROCESS NORMALLY IS COMPLETED WITHIN A PERIOD VARYI NG BETWEEN TWO MONTHS TO FOUR ITA NO.1493/KOL/2013 BISAKHA SALES PVT. LTD. ASSESSMENT YEAR: 2008 -09 13 MONTHS. THIS IS SO THAT SUCH REOPENING NEVER GETS R ECORDED IN THE REGISTERS MAINTAINED BY THE AO IN RESPECT OF SUCH REOPENING A ND INTIMATION TO HIGHER AUTHORITIES. 7.2 THE FIRST QUESTION COMES TO OUR MIND IS AS TO W HY THIS HURRY IN COMPLETING THE REASSESSMENT PROCEEDINGS ESPECIALLY WHEN SUBSTA NTIAL TIME IS STILL AVAILABLE AND DETAILED INQUIRY IS EXPECTED. NORMALLY, ONCE REOPEN ING IS DONE BY ISSUANCE OF NOTICE UNDER SECTION 148, THE FULL TIME AS AVAILABL E UNDER THE ACT IS USED BY THE AO BUT CONSPICUOUSLY IN ALL SUCH CASES THE ASSESSMENTS ARE CLOSED FAST. THESE ARE SPECIAL CASES WHERE WITHIN SUCH A SHORT PERIOD OF I SSUANCE OF NOTICE UNDER SECTION 148, ASSESSMENT STANDS CONCLUDED WITHOUT ANY INVEST IGATION OR VERIFICATION OR INQUIRY WORTH ITS NAME. ONE IS LEFT WONDERING AS TO WHETHER IT IS ON PURPOSE AND DESIGN OR WHETHER IT WAS IN THE NORMAL COURSE AS TH IS FEATURE IS SPECIAL ONLY TO SUCH COMPANIES WHERE LARGE SHARE CAPITAL HAS BEEN INTROD UCED. 7.3 TAX AVOIDANCE IS AN ACCEPTED PRINCIPLE. ANY PER SON IS ENTITLED TO ADJUST ITS AFFAIRS IN SUCH MANNER AS TO MINIMIZE TAX LIABILITY . HOWEVER, THE METHODOLOGY AND ACTS DONE IN SUCH CASES OF CAPITAL FORMATION IS NOT TAX AVOIDANCE. IT IS MORE IN THE NATURE OF TAX EVASION BY MONEY LAUNDERING. THESE TR ANSACTIONS HAVE IN EFFECT THREE LIMBS. THE FIRST LIMB IS THE CREATION OF THE SHELL COMPANIES WITH SUBSTANTIAL SHARE CAPITAL WHICH IS BALANCED WITH INVENTORIES IN THE F ORM OF SHARES IN OTHER SHELL COMPANIES. THE SECOND LIMB IS THE TRANSFER OF SUCH SHELL COMPANIES TO PERSONS WHO DESIRE TO USE SUCH SUBSTANTIAL SHARE CAPITAL COMPAN IES FOR CONVERTING THEIR UNACCOUNTED MONEY INTO ACCOUNTED FUNDS AND USE SUCH SHELL COMPANIES TO DO LEGITIMATE BUSINESS. THE THIRD LIMB IS WHEN THE SHE LL COMPANIES AFTER BEING TAKEN OVER, THE ASSETS IN THE FORM OF INVENTORIES ARE ENC ASHED WHEREBY THE UNACCOUNTED MONIES ARE LAUNDERED AND BROUGHT INTO THE COMPANY F OR CONDUCTING THE LEGITIMATE BUSINESS. ALL THESE THREE LIMBS ARE NOT DONE IN ONE ASSESSMENT YEAR BUT IN DIFFERENT ASSESSMENT YEARS. IN FACT, IN THE PRESENT CASE THE SHARE CAPITAL HAS BEEN INTRODUCED IN THE ASSESSMENT YEAR 2008-09, THE MANAGEMENT STAR TED THE CHANGE IN THE ASSESSMENT YEAR 2010-11 AND WAS COMPLETED IN THE AS SESSMENT YEAR 2011-12 WHEN ITA NO.1493/KOL/2013 BISAKHA SALES PVT. LTD. ASSESSMENT YEAR: 2008 -09 14 EVEN THE INVESTMENTS WERE REDEEMED. THUS IT IS NOT IN ONE YEAR THE WHOLE PROCESS IS DONE AND IT IS DONE OVER A PERIOD OF MORE THAN T WO AND SOMETIMES THREE ASSESSMENT YEARS. THERE CAN BE COMPANIES WHICH WERE CREATED IN THE ASSESSMENT YEAR 2005-06, OR EVEN 2006-07 BEING YEARS WHICH WOU LD BE BEYOND THE PERIOD OF LIMITATION FOR REOPENING BUT THE CHANGE IN MANAGEME NT AND THE CONVERSION OF THE INVENTORIES TAKE PLACE IN 2008-09 OR LATER WHICH IS WITHIN THE PERIOD OF LIMITATION FOR REOPENING. THE LD. CIT BY INCLUDING CLAUSES (II ) AND (III) IN HER ORDER UNDER SECTION 263 IS BUT ONLY DRAWING THE ATTENTION OF TH E AO AS TO THE LINE OF ENQUIRY THAT IS EXPECTED TO BE DONE. AT TWO POINTS UNACCOUN TED MONIES ARE LAUNDERED. AT THE FIRST STAGE AND AT THE THIRD STAGE, I.E. ONCE A T THE POINT OF CREATION OF SHARE CAPITAL AND THEN AGAIN AT THE POINT OF CONVERTING T HE INVENTORIES/INVESTMENTS/ LOANS AND ADVANCES INTO FUNDS FOR THE LEGITIMATE BUSINESS PURPOSE. 7.4 IT IS RELEVANT BECAUSE THE CREATION OF THE SHEL L COMPANIES AND INTRODUCTION OF THE SHARE CAPITAL IS NOT THE ONLY ISSUE THAT COMES UP. THIS IS BUT THE TIP OF THE ICE- BERG. A PERUSAL OF THE BALANCE SHEET AND PROFIT & L OSS ACCOUNT IN THE CASE OF THE ASSESSEE SHOWS THAT THE SHARE APPLICATION MONIES RE CEIVED BY THE ASSESSEE ALONG WITH THE PREMIUM ARE REPRESENTED IN THE BALANCE SHE ET IN THE FORM OF CURRENT ASSETS BEING THE UNQUOTED EQUITY SHARES IN OTHER SU CH COMPANIES. THAT IS THE SHARE APPLICATION MONEY RECEIVED BY THE ASSESSEE IS USED FOR MAKING FURTHER INVESTMENTS IN OTHER SUCH SIMILAR SHELL COMPANIES FROM WHOM CAS H IS TAKEN AND REROUTED THROUGH CHEQUES. THESE SHELL COMPANIES WHICH ARE AC QUIRED BY THE INTERESTED THIRD PARTIES PURCHASE THESE COMPANIES AT A FRACTIONAL AM OUNT OF THE VALUE OF THE SHARES. THAT MEANS A COMPANY WHOSE SHARE VALUE IS RS.10/-, THE SHARE IS ISSUED AT A PREMIUM OF RS.490/- TOTAL VALUE OF THE SHARE BECOME S RS.500/-. THIS CONTAINS FIRST PORTION OF THE UNACCOUNTED CASH BROUGHT IN OR CONVERTED THROUGH THE ACCOMMODATION ENTRY. NOW THIS 500 RUPEES SHARE IS P URCHASED BY THE THIRD PARTY OR THE INTERESTED PERSON IN TAKING OVER THE COMPANY FOR THE PURPOSE OF UTILIZING ITS CAPITAL. IT MAY BE TWO RUPEES OR THRE E RUPEES PER SHARE. HERE THE PURCHASE PRICE IS EVEN BELOW THE FACE VALUE OF THE SHARES OR AT THE FACE VALUE. THE ITA NO.1493/KOL/2013 BISAKHA SALES PVT. LTD. ASSESSMENT YEAR: 2008 -09 15 PREMIUM IS IN EFFECT THE BONUS. THE PREMIUM ALREADY INTRODUCED SITS IN THE LIABILITY SIDE AS A RESERVE AND ON THE ASSET SIDE A S INVESTMENTS IN OTHER SHELL COMPANIES. NOW ONCE THE CONTROLLING INTEREST IS TAK EN, THEN THE BALANCE SHEET HAS TO BE CLEANED. THE BALANCE SHEET WHICH NOW HOLDS IN CURRENT ASSETS THE UN-QUOTED SHARES OF OTHER SHELL COMPANIES AND LOANS AND ADVANCES GET CLEANED BY AGAIN LIQUIDATING THESE CURRENT ASSETS. NOW THESE CURRENT ASSETS REPRESENTING THE SHARE APPLICATION MONEY OR THE INVENTORIES BEING SHARES I N THE UNQUOTED COMPANIES ARE SITTING AT A PREMIUM BECAUSE THESE SHARES HAVE ALSO BEEN APPLIED FOR AND PURCHASED AT A PREMIUM. HOW THIS MONEY WAS BROUGHT BACK INTO THE COMPANY HAS NOT BEEN EXAMINED. WHEN THIS HAS COME BACK HAS NOT BEEN EXAMINED AND WHO ARE THE PEOPLE RESPONSIBLE WHEN THESE TRANSACTIONS TOOK PLACE HAS NOT BEEN EXAMINED. HERE THE SECOND ROUND OF LAUNDERING OF UNACCOUNTED FUNDS IS DONE. MUCH LESS BEING EXAMINED, THE DETAILS ARE NOT AVAILABLE NOR GIVEN. THIS IS BECAUSE THE INVENTORIES ARE ALSO SHARES OF SHELL COMPANIES AND NO INVESTOR WORTH HIS SALT WOULD ACQUIRE THE SHARES OF SUCH SHELL COMPANIES AT SUCH PREMIUM. THE QUESTION WOULD ARISE ALSO AS TO WHETHER ANY OF THESE SHELL COMPANI ES IN WHICH THE ASSESSEE COMPANY HAS MADE THE INVESTMENT, HAVE ALSO BEEN SOLD OR TRANSFERRED. IN SUCH A CASE, IT BECOMES MORE INTRICATE. THERE IS NO INFORM ATION AS TO WHETHER THERE IS A CLAIM OF CAPITAL LOSS OR THERE IS AN OFFER OF CAPIT AL GAINS IN THE RETURNS OF INCOME OF THE ASSESSEE HOW THESE SHARES MORE SO THE CURRENT A SSETS WERE CLEANED FROM THE BALANCE SHEET. THESE ARE CASES OF CLEAR HUMAN INGEN UINITY WITH THE CLEAR AND CONTUMACIOUS INTENTION TO DEFRAUD THE REVENUE. IT I S NOT THE HANDIWORK OF ONE PERSON ALONE. ONE PERSON HAS CREATED THE SHELL, ANO THER HAS FUNDED THE SHELL WITH AN INTENTION TO LAUNDER UNACCOUNTED FUNDS AND AFTER HAVING ACQUIRED THE SHELL HAS USED IT FOR CONVERTING ITS FUNDS ALSO. THERE IS NO INFORMATION AS TO WHO ARE THE LATEST BENEFICIARIES OF SUCH SHELL COMPANIES AND FO R WHAT PURPOSE THE COMPANIES ARE BEING USED. THIS IS JUST THE REASON WHY THE PRO VISION OF SECTION 56(VIIB) HAS BEEN INTRODUCED. ITA NO.1493/KOL/2013 BISAKHA SALES PVT. LTD. ASSESSMENT YEAR: 2008 -09 16 7.5 COMING TO THE ISSUE OF PREMIUM, THOUGH THERE HA S BEEN AN ARGUMENT BY THE LD. SR. COUNSEL THAT THE LD. CIT HAS DROPPED THE IS SUE OF PREMIUM, IT IS NOWHERE FOUND IN THE ORDER. THE ISSUE OF SHARE PREMIUM IN L INE WITH THE PROVISION OF SECTION 78 NEEDS TO BE EXAMINED. 7.6 WE FIND THAT THE LD. CIT HAS EXERCISED HIS JURI SDICTION U/S 263 OF THE ACT DUE TO THE FOLLOWING TWO REASONS : I) HUGE SHARE PREMIUMS WERE RECEIVED AND THIS WAS NOT ENQUIRED INTO BY THE AO. II) AO HAS NOT DONE PROPER ENQUIRY INTO THE SHARE APPLICATION MONEY RECEIVED. 7.6.1 AS REGARDS THE SHARE PREMIUM RECEIPT, WE FIND THAT THE ASSESSEE COMPANY WAS INCORPORATED ON 12.02.2007. DURING THE CURRENT YEAR THE ASSESSEE COMPANY HAS RECEIVED SHARE APPLICATION MONEY FOR A SHARE OF NOM INAL VALUE OF RS.10 EACH PER SHARE AT A PREMIUM OF RS.240/- EACH. APPARENTLY THE RE WAS NO REASON AS TO WHY THE SHARE OF THIS COMPANY WOULD COMMAND SO MUCH SHARE P REMIUM. SINCE THE AO HAS NOT DONE ANY EXAMINATION IN THIS RESPECT THE LD. CI T HAS EXERCISED HIS JURISDICTION U/S 263 OF THE ACT. IN THIS REGARD THE LD. COUNSEL OF THE ASSESSEE HAS SUBMITTED THAT THE SHARE APPLICATION MONEY WAS RECEIVED WITH A HUG E SHARE PREMIUM ONLY TO REDUCE THE INCIDENCE OF ROC FEE WHICH IS ATTRACTED WHEN SHARES ARE ALLOTTED AT PAR.THE LD. COUNSEL OF THE ASSESSEE FURTHER SUBMITT ED THAT THE AO NEED NOT MAKE ANY ENQUIRY IN THIS REGARD AS IT WAS NOT WARRANTED AS SECTION 56(VII)(B) WAS INSERTED BY FINANCE ACT 2012 W.E.F. 01.04.2013. 7.6.2 NOW WE FIND THAT THE ABOVE SUBMISSION OF THE LD. COUNSEL OF THE ASSESSEE IS NOT ACCEPTABLE. IN THIS CASE SHARES OF RS.10 WERE A PPLIED AT A PREMIUM OF RS.240/-. THERE IS NO APPARENT REASON AS TO WHY SUCH HUGE AMO UNT OF SHARE PREMIUM WOULD BE PAID FOR OBTAINING SHARE OF FACE VALUE OF RS.10. ANY NORMAL PRUDENT PERSON WHO MAKES INVESTMENT IN SHARES WOULD MAKE THE INVESTMEN T IN ACCORDANCE WITH THE FAIR MARKET VALUE OF THE SHARES. IT CERTAINLY WARRANTED AN ENQUIRY BY THE AO. ITA NO.1493/KOL/2013 BISAKHA SALES PVT. LTD. ASSESSMENT YEAR: 2008 -09 17 MOREOVER, THE ENQUIRY INTO THE OTHER ASPECT OF SHAR E APPLICATION MONEY RECEIPT WAS ALSO TO BE DONE KEEPING IN VIEW THIS ASPECT OF HUGE SHARE PREMIUM RECEIPT. 7.6.3 IN THIS REGARD WE MAY NOTE THAT SECTION 56 (V II)(B) READS AS UNDER :- 56 (VIIB) :WHERE A COMPANY, NOT BEING A COMPANY IN WHICH THE PUBLIC ARE SUBSTANTIALLY INTERESTED, RECEIVES, IN ANY PREVIOUS YEAR, FROM ANY PERSON BEING A RESIDENT, ANY CONSIDERATION FOR ISSUE OF SHARES T HAT EXCEEDS THE FACE VALUE OF SUCH SHARES, THE AGGREGATE CONSIDERATION RECEIVED F OR SUCH SHARES AS EXCEEDS THE FAIR MARKET VALUE OF THE SHARES. 7.6.4 BY NO STRETCH OF IMAGINATION IT CAN BE SAID T HAT EXAMINATION U/S 68 OF DISPROPORTIONATE SHARE PREMIUM MONEY HINGES ON THE PROVISION OF SECTION 56(VIIB). ADMITTEDLY THIS SUB-SECTION WAS INSERTED BY THE FIN ANCE ACT 2012 W.E.F. 01.04.2013. SIMPLY BECAUSE THIS SECTION WAS INSERTE D W.E.F. 01.04.2013 IT CANNOT BE INFERRED THAT ANY HUGE SHARE PREMIUM RECEIPT MUC H BEYOND THE FAIR MARKET VALUE PRIOR TO THIS INSERTION DOES NOT REQUIRE ANY EXAMINATION BY THE REVENUE AUTHORITIES UNDER SECTION 68 OF THE IT ACT. AS A MA TTER OF FACT SECTION 54(V) WAS INSERTED W.E.F 01.04.2005. THIS WAS IN CONNECTION W ITH THE AMOUNTS RECEIVED WITHOUT CONSIDERATION AND THE TREATMENT THEREOF. IN OTHER WORDS THIS RELATED TO TAXATION OF GIFTS RECEIVED. BY NO STRETCH OF IMAGI NATION IT CAN BE CLAIMED THAT PRIOR TO THIS INSERTION THE RECEIPT OF MONEY WITHOUT CONS IDERATION AS GIFT WAS NOT REQUIRED TO BE EXAMINED. AS A MATTER OF FACT, THE H ONBLE APEX COURT IN THE CASE OF CIT VS MOHAN P. 291 ITR 278 WAS EXACTLY CONSIDER ING THIS ISSUE. 7.6.5 HENCE THE SUBMISSION OF THE LD. COUNSEL OF TH E ASSESSEE THAT AS INSERTION OF SECTION 56(VIIB) WAS DONE W.E.F. 01.04.2013 THERE W AS NO REQUIREMENT ON THE PART OF THE AO TO ENQUIRE THE RECEIPT OF HUGE SHARE PREM IUM U/S 68 IS NOT AT ALL SUSTAINABLE. 7.7 THERE IS ANOTHER IMPORTANT ASPECT WHICH SHOULD ALSO BE BORNE IN MIND IN THIS CASE. THESE SHARES WERE RECEIVED AFTER PAYING HUGE PREMIUM BY THE ALLOTTEES. THESE WERE SUBSEQUENTLY TRANSFERRED AT FACE VALUE O R EVEN AT DISCOUNT. THIS MEANS ITA NO.1493/KOL/2013 BISAKHA SALES PVT. LTD. ASSESSMENT YEAR: 2008 -09 18 THAT ON TRANSFER OF SHARES THE ALLOTTEE DID NOT REC EIVE ANY PREMIUM. THIS MEANS THAT HUGE AMOUNT WAS RECEIVED AND PAID AS SHARE PREMIUM WITH FULL KNOWLEDGE THAT THERE WILL BE NO RECOVERY OR THERE IS NO SCOPE OF R ECOVERY OF SHARE PREMIUM. THIS WAS DESIGNED TO FACILITATE THE TRANSFER OF THESE CO MPANIES TO OTHER PERSONS ON PAYMENT OF NOMINAL OR DISCOUNTED VALUE OF SHARES. I N OTHER WORDS THE VALUE EMBEDDED IN THE SHARE PREMIUM WAS MEANT TO BE TRANS FERRED UNDER HAND, AND PRIMA FACIE IT APPEARS THAT THE TRANSFER TOOK PLACE UPON PAYMENT OF UNDER HAND MONEY. THIS IS A CLASSIC CASE OF MONEY LAUNDERING A ND THE SHARE PREMIUM WAS BEING RECEIVED AND PAID TO LAUNDER THE BLACK MONEY. THIS HAPPENS AT THE SECOND LIMB I.E., WHEN THE DIRECTORS CHANGE AND THE COMPAN Y CHANGES HAND. 7.7.1 THE ABOVE FACTS CLEARLY PROVIDE THAT RECEIPT OF SHARE APPLICATION MONEY WITH HUGE SHARE PREMIUM WARRANTED DETAILED ENQUIRY BY TH E AO AND NOT A PERFUNCTORY ENQUIRY. 7.8 THE HONBLE APEX COURT IN THE CASE OF CIT VS DU RGA PRASAD MORE 82 ITR 540 AND IN THE CASE OF SUMATI DAYAL VS CIT 214 ITR 801 HAS EXPOUNDED THAT REVENUE AUTHORITIES ARE ALSO SUPPOSED TO CONSIDER T HE SURROUNDING CIRCUMSTANCES AND APPLY THE TEST OF HUMAN PROBABILITY. IN THESE C ASES THE TRANSACTIONS THOUGH APPARENT WERE HELD TO BE NOT REAL ONES. 7.8.1 IN 63 ITR 609 IN THE CASE OF CIT VS SRI MEENA KSHI MILLS LTD HONBLE APEX COURT HAS HELD THAT IN EXCEPTIONAL CIRCUMSTANCES CO URTS ARE ENTITLED TO LIFT THE VEIL OF CORPORATE ENTITY AND TO PAY REGARD TO THE ECONOM IC REALITIES BEHIND THE LEGAL FACADE. 7.8.2 HENCE JUST BECAUSE THE SHARE APPLICATION WITH HUGE AND UNJUSTIFIED SHARE PREMIUM WAS RECEIVED FROM CORPORATE ENTITIES THROUG H BANKING CHANNEL, NO ENQUIRY IS WARRANTED IS NOT AT ALL A SUSTAINABLE PL EA ON THE FACTS AND CIRCUMSTANCES OF THE CASE AND ON THE BASIS OF EXPOSITION OF THE H ONBLE APEX COURT AS REFERRED ABOVE. IN FACT IT WARRANTS A MORE DETAILED ENQUIRY. ITA NO.1493/KOL/2013 BISAKHA SALES PVT. LTD. ASSESSMENT YEAR: 2008 -09 19 7.9 WE FURTHER FIND THAT THE HONBLE APEX COURT IN THE CASE OF BHARAT FINE INSURANCE COMPANY VS CIT (1964) 34 COS. 683 HAS HEL D THAT PRIOR TO THE ENACTMENT OF SECTION 78 PREMIUM RECEIVED ON ISSUE O F SHARES WERE PROFITS. NOW SECTION 78 OF THE ACT PROVIDES THAT AGGREGATE VALUE OF SHARE PREMIUM SHOULD BE TRANSFERRED TO AN ACCOUNT TO BE CALLED THE SECURITI ES NEW ACCOUNT. SECTION 78(2) OF THE ACT PROVIDES THAT SHARE PREMIUM ACCOUNT MAY BE UTILIZED FOR THE FOLLOWING PURPOSE :- (A) IN PAYING UP UNISSUED SHARES OF THE COMPANY TO BE ISSUED TO MEMBERS OF THE COMPANY AS FULLY PAID BONUS SHARES : (B) IN WRITING OFF THE PRELIMINARY EXPENSES OF TH E COMPANY; (C) IN WRITING OFF THE EXPENSES OF, OR THE COMMIS SION PAID OR DISCOUNT ALLOWED ON, ANY ISSUE OF SHARES OR DEBENTURES OF TH E COMPANY; OR (D) IN PROVIDING FOR THE PREMIUM PAYABLE ON THE R EDEMPTION OF ANY REDEEMABLE PREFERENCE SHARES OR OF ANY DEBENTURES O F THE COMPANY 7.10 FROM THE ABOVE IT IS APPARENT THAT BUT FOR THE RESTRICTION PROVIDED U/S 78(2) THE AMOUNTS CREDITED IN THE SHARE PREMIUM ACCOUNT W OULD TAKE THE CHARACTER OF THE PROFIT AND CONSEQUENTIALLY WOULD BE LIABLE TO BE TA XED AS SUCH. BUT THE ADHERENCE TO SECTION 78(2) GIVES THE SHARE PREMIUM ACCOUNT TH E CHARACTERISTIC OF CAPITAL RECEIPT. IN THE PRESENT CASE BEFORE US WE FIND THAT THERE IS NO EXAMINATION AS TO WHETHER THE COMPANY HAS EVER ADHERED TO THE PRESCRI PTION OF THE COMPANIES ACT IN THIS REGARD. IF THE COMPANY HAS NOT ADHERED TO THE PRESCRIPTION OF THE ACT, THE AMOUNT INVOLVED WAS LIABLE TO BE TAXED AS REVENUE R ECEIPT. 7.10.1 IN FACT THIS IS PART OF THE EXAMINATION D IRECTED BY THE LD. CIT IN CLAUSE (I) OF HER ORDER. ANOTHER INTERESTING FACTOR IN THIS CA SE IS THE EARNINGS PER SHARE (E.P.S.). TILL THE YEAR ENDED 31/3/2010 THE E.P.S. WAS ZERO. WHEN THE E.P.S. WAS ZERO THE COMPANYS SHARE WITH A FACE VALUE OF RS.10 /- WAS COMMANDING A ITA NO.1493/KOL/2013 BISAKHA SALES PVT. LTD. ASSESSMENT YEAR: 2008 -09 20 PREMIUM OF RS.490/-. AS ON 31/3/2011, THE E.P.S. RO SE TO RS.6.84. THIS ITSELF SHOWS THE CHANGE IN THE MANAGEMENT AND THE LIQUIDAT ION OF THE INVESTMENT IN SHARES, UNQUOTED SHARES. BUT WITH THIS E.P.S. TH E PROFIT AFTER TAXATION IS ONLY RS.9,77,992/-. FOR THE YEAR ENDED 31/8/2012 THE PRO FIT AFTER TAXATION IS RS.15,22,581/- AND THE E.P.S. IS RS.10.64. THUS CLE ARLY WHEN THE E.P.S. IS 0, THE ISSUANCE OF SUCH PREMIUM ON THE SHARES ITSELF CALLS FOR DETAILED ENQUIRY. 7.10.2 ANOTHER INTERESTING ASPECT IN THIS CASE IS THE DATES. AS WE MENTIONED EARLIER THE CHANGE IN MANAGEMENT TOOK PLACE IN THE ASSESSMENT YEAR 2010-11, I.E. YEAR ENDED 31/3/2010, I.E. THE PERIOD 1/4/2009 TO 3 1/3/2010. THE REOPENING OF THE ASSESSMENT AND THE REASSESSMENT PROCEEDINGS TOOK PL ACE DURING THIS TIME. THIS CLEARLY SHOWS THE DUE DILIGENCE BEING ATTEMPTED WIT H THE CONTUMACIOUS INTENT TO ATTEMPT TO OBTAIN THE SEAL OF APPROVAL OF THE INCOM E-TAX DEPARTMENT IN RESPECT OF THE BOGUS SHARE CAPITAL INTRODUCED. 7.11 NOW COMING TO THE ISSUE OF THE LETTER AT PAGE 31 OF THE PAPER BOOK ON WHICH THE DATE 8/3/2010 HAS BEEN INCORPORATED. ONE IS LEF T WONDERING AS TO WHY IN THE FIRST PLACE THE CERTIFIED COPIES WERE BEING OBTAINE D. THESE ARE AS ADMITTED BY THE ASSESSEE TO BE DOCUMENTS AND LETTERS SUBMITTED BY T HE ASSESSEE ITSELF. IF IT IS SO, THEN THE COPIES OF THE SAME WOULD BE AVAILABLE WITH THE ASSESSEE. NOW AFTER GETTING THE CERTIFIED COPIES THE DATE IS NOT INCORP ORATED ON THE CERTIFIED COPY BUT ON A ZEROX COPY OF THE CERTIFIED COPY AND THEN BY MIST AKE SUCH INCORPORATED XEROX COPY IS USED FOR MAKING THE PAPER BOOK WHEN ALL OTH ER COPIES ARE THE CERTIFIED COPIES. EVEN TO AN UNTRAINED MIND OBVIOUSLY THE SIG HT OF A DOCUMENT WITHOUT THE ORIGINAL BLUE COLOURED SEAL IN A MASS OF PAPERS SHO ULD HAVE DRAWN ATTENTION. WITHOUT SAYING ANYTHING MORE, WE LEAVE THE ISSUE AS IT IS. 7.12 THE ISSUE OF THE MERITS IN RESPECT OF THE ADDI TION ON ACCOUNT OF SHARE CAPITAL, NOR THE CHANGE IN MANAGEMENT, NOR THE MERITS OF THE ISSUE OF THE SOURCE OF REALIZATION FROM THE LIQUIDATION OF ASSETS SHOWN IN THE BALANCE-SHEET AFTER THE CHANGE OF DIRECTORS, IF ANY, ARE NOT BEFORE US. THE REFORE, WE WOULD NOT GO INTO THE ITA NO.1493/KOL/2013 BISAKHA SALES PVT. LTD. ASSESSMENT YEAR: 2008 -09 21 MERITS OF THESE ISSUES. HOWEVER, THE FACTS IN THE P RESENT CASE CLEARLY WARRANT THE UPHOLDING OF THE ORDER UNDER SECTION 263 AS PASSED BY THE LD. CIT AND WE DO SO. 7.13 NOW COMING TO THE CASE LAWS THAT HAVE BEEN CIT ED. ADMITTEDLY, WE MUST CONCUR WITH THE LD. SR. COUNSEL THAT THE DECISION O F THE HONBLE DELHI HIGH COURT IN THE CASE OF BHAGWATI JEWELS LTD. REPORTED IN 201 ITR 461 (DEL) HAS NO BEARING IN SO FAR AS IN THAT CASE THE HONBLE DELHI HIGH CO URT HAS ONLY HELD THAT THE QUESTION UNDER REFERENCE WAS LIABLE TO BE REFERRED. COMING TO THE DECISION IN THE CASE OF ROSE BERRY MERCANTILE (P) LTD. IN G.A. NO.3 296 OF 2010 DATED 10/01/2011, THE HONBLE CALCUTTA HIGH COURT HAS HELD THAT THE I SSUE OF SHARE CAPITAL WAS COVERED BY THE DECISION OF THE HONBLE SUPREME COUR T IN THE CASE OF LOVELY EXPORTS PVT. LTD. REPORTED IN 216 CTR 195(SC). HOWE VER, THIS DECISION HAS NO APPLICABILITY TO THE FACTS IN THIS CASE IN SO FAR A S THE SAID DECISION IS NOT ON THE ISSUE OF 263. IF AT ALL, THIS IS A DECISION WHICH COULD B E CONSIDERED WHEN THE ISSUES ARE DECIDED ON MERITS OF THE ADDITION SUBJECT TO ALL TH E CONDITIONS BEING FULFILLED THEREIN. COMING TO THE DECISION OF LOTUS CAPITAL FI NANCIAL SERVICES LTD. IN G.A. 1507 OF 2012 DATED 16/07/2012, THE HONBLE CALCUTTA HIGH COURT HAS UPHELD THE QUASHING OF THE ORDER PASSED UNDER SECTION 263 BY T HE ITAT ON THE GROUND THAT THE ASSESSEE HAS FILED COMPLETE DETAILS, AND THE SAME W AS VERIFIED BY THE A.O. AND THE PROSPECTIVE SHAREHOLDERS ALSO REPLIED AND THE AO HA S GIVEN HIS FINDING IN HIS ORDER PASSED UNDER SECTION 143(3). IN THE PRESENT CASE, T HE FACTS ARE COMPLETELY DIFFERENT. IN THE FIRST PLACE, THE SUBMISSION OF ALL THE DETAI LS BEFORE THE AO BY THE LETTER DATED 08/03/2010 ITSELF IS QUESTIONABLE. THE AO HAS DONE NO FURTHER VERIFICATION AND THE AO HAS NOT GIVEN ANY FINDING IN RESPECT OF THE SHAR E CAPITAL IN THE ASSESSMENT ORDER NOR IN THE ORDER-SHEET NOTINGS. ONLY THE ISSU E OF SHARE APPLICATION MONEY RECEIVED HAS BEEN MENTIONED. THE ASSESSMENT ORDER I S BALD IN RESPECT OF THE FINDINGS ON THE ISSUE OF SHARE APPLICATION MONEY RE CEIVED. IN THESE CIRCUMSTANCES, THIS DECISION ALSO IS NOT OF ANY HELP TO THE ASSESS EE. THE DECISION RELIED UPON BY THE LD. SR. COUNSEL IN THE CASE OF MULCHAND BAGRI R EPORTED IN 68 TAXMAN 215 (CAL) IS ALSO NOT APPLICABLE IN SO FAR AS IN THAT CASE, T HERE WAS EXCHANGE OF ITA NO.1493/KOL/2013 BISAKHA SALES PVT. LTD. ASSESSMENT YEAR: 2008 -09 22 CORRESPONDENCE AND ACTUAL ENQUIRIES WERE CONDUCTED BY THE AO. IN THE ASSESSEES CASE, THIS IS NOT SO. 7.13.1 SIMILARLY, IN THE CASE OF SPECTRA SHARE & SCRIPS AS ALSO JYOTI FOUNDATION, ENQUIRIES HAD BEEN DONE BY THE AO THEREIN. IN THE A SSESSEES CASE THE ABSENCE OF ENQUIRY IS EXPRESSLY EVIDENT FROM THE ABSENCE OF AN Y ORDER-SHEET NOTING IN RESPECT OF SUCH ENQUIRY AS ALSO THE ABSENCE OF ANY MENTION OF ANY ENQUIRY IN THE ASSESSMENT ORDER. 7.14 FURTHER THE FACT THAT THE LD. CIT HAS IN HER O RDER UNDER SECTION 263 ADDRESSED THE ISSUES OF THE THREE LAYERS IN THE TRANSACTION C LEARLY SHOWS THE ENQUIRY DONE BY THE LD. CIT. SUCH BACKGROUND STATEMENTS AS MADE BY THE LD. CIT ALSO CLEARLY SHOWS THE ENQUIRY DONE BY HER. THE CLAIM THAT THE BACKGRO UND IS A GENERALIZED BACKGROUND ALSO DOES NOT HOLD WATER IN SO FAR AS TH E MODUS OPERANDI OF THE ASSESSEES ARE SIMILAR AND THE DIFFERENCES ARE MINIM AL. 7.15 COMING TO THE ISSUE OF TANGIBLE MATERIAL, A PE RUSAL OF THE PROVISIONS OF SECTION 263 SHOWS THAT THE LD. CIT HAS THE POWER TO GIVE DIRECTIONS FOR ASSESSMENT OF A PARTICULAR ISSUE AS ALSO THE POWERS TO SET ASI DE THE ASSESSMENT FOR FRESH CONSIDERATION ON SPECIFIC ISSUES OR DE NOVO . WHEN THE LD. CIT IS DIRECTING TO ASSESS A PARTICULAR INCOME THEN SUCH DIRECTIONS MUST BE ON SPECIFIC TANGIBLE MATERIAL. IN THE PRESENT CASE, THE ORDER UNDER SECTION 263 CLEAR LY SHOWS THAT THE LD. CIT DID HAVE VERY TANGILE INFORMATION AND MATERIAL ON THE B ASIS OF WHICH SHE HAS CONDUCTED THE ENQUIRY AND THEN HAS SET ASIDE THE AS SESSMENT TO CONDUCT ENQUIRY IN RESPECT OF THE THREE LIMBS OF THE TRANSACTIONS AND GRANT THE ASSESSEE THE OPPORTUNITY TO EXPLAIN ITS CASE. CONSEQUENTLY THE DECISION RELI ED BY THE LD. SR. COUNSEL IN THE CASE OF DEVELOPMENT CREDIT BANK LTD. REPORTED IN 32 3 ITR 206 (BOM.) DOES NOT HELP THE CASE OF THE ASSESSEE. 7.15.1. IN FACT THE DECISION IN THE CASE OF ACTI VE TRADERS REPORTED IN 224 ITR 583 (CAL) WHEREIN THE HONBLE HIGH COURT OF CALCUTTA HA S HELD THAT THE ENQUIRY WAS ITA NO.1493/KOL/2013 BISAKHA SALES PVT. LTD. ASSESSMENT YEAR: 2008 -09 23 NOT TAKEN TO ITS LOGIC END IS MORE APPLICABLE TO TH E FACTS OF THIS CASE. ALSO THE DECISION IN THE CASE OF INFOSYS TECHNOLOGIES LTD. R EPORTED IN 341 ITR 293 (KAR) WHEREIN THE HONBLE HIGH COURT OF KARNATAKA HAS HEL D THE PROVISION IS INTENDED TO PLUG LEAKAGES TO THE REVENUE BY ERRONEOUS ORDERS PASSED BY THE LOWER AUTHORITIES, WHETHER BY MISTAKE OR IN IGNORANCE OR EVEN BY DESIGN IS MORE APT TO EXPLAIN THE ACTIONS THAT HAVE LEAD TO THE 263 ORDER S BEING PASSED IN SUCH CASES. 7.15.2. HERE THE DECISION OF THE HONBLE FULL BEN CH OF THE HONBLE GAUHATI HIGH COURT IN THE CASE OF JAWAHAR BHATTACHARJEE REPORTED IN 341 ITR 434 (GAUHATI( (FB) IS FOUND TO BE SUBSTANTIALLY SIMILAR TO THE AS SESSEES CASE IN SO FAR AS THE HONBLE HIGH COURT HAS HELD NOT HOLDING SUCH INQUI RY AS IS NORMAL AND NOT APPLYING THE MIND TO RELEVANT MATERIAL IN MAKING AN ASSESSMENT WOULD BE ERRONEOUS ASSESSMENT WARRANTING EXERCISE OF REVISIO NAL JURISDICTION. WE MAY FURTHER EXTRACT SOME RELEVANT PARAGRAPHS FROM THE S AID ORDER. REFERENCE MAY BRIEFLY BE MADE TO THE FACTS GIVING R ISE TO THE ISSUE. THE ASSESSEE WAS ASESSED FOR THE ASSESSMENT YEAR 2002-03 BY ASSESSING OFFICER (AO) GIVING THE BENEFIT OF EXE MPTION UNDER SECTION 54F OF THE INCOME-TAX ACT, 1961, FOR LONG-TERM CAPITAL GAINS FROM SALE OF SHARES. THE SHARES WERE PURCHASE D ON APRIL 21, 2000, FOR RS.19,536 AND SOLD ON MAY 2, 2001, FOR RS .6,36,640, I.E., ON THE INCREASED PRICE OF MORE THAN 30 TIMES IN ONE YEAR. THE COMMISSIONER OF INCOME-TAX (CIT) HELD THE ORDER TO BE ERRONEOUS AND PREJUDICIAL TO THE INTERESTS OF THE REVENUE AND EXERCISED SUO MOTU REVISIONAL JURISDICTION UNDER SECTION 263 OF T HE ACT. IT WAS INTER ALIA, OBSERVED THAT ' WHILE ACCEPTING THE GEN UINENESS OF THE SHARE TRANSACTION, THE ASSESSING OFFICER FAILED TO MAKE ANY ENQUIRY WHICH, IN THE FACTS AND CIRCUMSTANCES, WOULD NORMAL LY BE MADE TO ASCERTAIN THE CAPITAL GAIN IN QUESTION. THE ASSESSE E WAS NOT A HABITUAL OPERATOR OF SHARE MARKET AND HAD NO SHARE OF ANY OTHER COMPANY; SHARE WAS NOT OF A WELL KNOWN COMPANY; THE PRICE JUMPED FROM RS.6 PER SHARE TO RS.200 PER SHARE WITH IN A SHORT SPAN OF THIRTEEN MONTHS WITHOUT ANY APPARENT REASON . THE ASSESSING OFFICER COULD HAVE OBTAINED ANNUAL ACCOUN TS OF THE COMPANY TO SATISFY HIMSELF WHETHER THE COMMERCIAL A CTIVITIES OF THE COMPANY JUSTIFIED SUCH A JUMP IN PRICE. HE COULD HA VE OBTAINED PRICE QUOTATIONS OF THE SHARES ON A FEW DATES TO EXAMINE THE REASONABLENESS OF THE JUMP. THE ALLEGED SELLERS AND BUYERS SHOULD HAVE BEEN EXAMINED. ACCORDINGLY, THE ORDER WAS HELD TO BE ERRONEOUS AND PREJUDICIAL TO THE INTERESTS OF THE R EVENUE. THE ASSESSING OFFICER WAS DIRECTED TO REFRAME THE ASSES SMENT AFTER CONDUCTING THE NECESSARY ENQUIRIES. ITA NO.1493/KOL/2013 BISAKHA SALES PVT. LTD. ASSESSMENT YEAR: 2008 -09 24 7.16 THESE ARE THE FACTS. NOW IN THE FINDINGS, THE HONBLE HIGH COURT HAS HELD AS FOLLOWS: TO DETERMINE THE QUESTION IN HAND, LET US FIRST HAV E A LOOK AT THE STATUTORY PROVISION. ' 263. REVISION OF ORDERS PREJUDICIAL TO REVENUE (1 ) COMMISSIONER MAY CALL FOR AND EXAMINE THE RECORD OF ANY PROCEEDING U NDER THIS ACT, AND IF HE CONSIDERS THAT ANY ORDER PASSED THEREIN BY THE ASSE SSING OFFICER IS ERRONEOUS IN SO FAR AS IT IS PREJUDICIAL TO THE INT ERESTS OF THE REVENUE, HE MAY, AFTER GIVING THE ASSESSEE AN OPPORTUNITY OF BE ING HEARD AND AFTER MAKING OR CAUSING TO BE MADE SUCH INQUIRY AS HE DEE MS NECESSARY, PASS SUCH ORDER THEREON AS THE CIRCUMSTANCES OF THE CASE JUSTIFY, INCLUDING AN ORDER ENHANCING OR MODIFYING THE ASSESSMENT, OR CAN CELLING THE ASSESSMENT AND DIRECTING A FRESH ASSESSMENT.' THE OBJECT OF THE PROVISION IS TO CORRECT AN ERRONE OUS ORDER PREJUDICIAL TO THE INTERESTS OF REVENUE, AS THE DEPARTMENT HAS NO RIGHT TO FILE AN APPEAL AGAINST THE ORDER OF THE ASSESSING OFFICER. WHILE T HE POWER IS NOT MEANT TO BE SUBSTITUTED FOR THE POWER OF THE ASSESSING OFFIC ER TO MAKE ASSESSMENT, THE SAME CAN CERTAINLY BE EXERCISED WHEN THE ORDER OF THE ASSESSING OFFICER IS ERRONEOUS AND PREJUDICIAL TO THE INTERES TS OF THE REVENUE. WHETHER OR NOT THE ORDER IS ERRONEOUS HAS TO BE DEC IDED FROM CASE TO CASE. INTERPRETATION OF SECTION 263 HAS BEEN THE SUBJECT -MATTER OF CONSIDERATION IN VARIOUS DECISIONS. IN MALABAR INDUSTRIAL CO. LTD. V. CIT [2000] 243 ITR 83 (SC), IT WAS OBSERVED (PAGES 87 AND 88) : 'THERE CAN BE NO DOUBT THAT THE PROVISION CANNOT BE INVOKED TO CORRECT EACH AND EVERY TYPE OF MISTAKE OR ERROR COMMITTED B Y THE ASSESSING OFFICER, IT IS ONLY WHEN AN ORDER IS ERRONEOUS THAT THE SECTION WILL BE ATTRACTED. AN INCORRECT ASSUMPTION OF FACTS OR AN I NCORRECT APPLICATION OF LAW WILL SATISFY THE REQUIREMENT OF THE ORDER BEING ERRONEOUS. IN THE SAME CATEGORY FALL ORDERS PASSED WITHOUT APPLYING T HE PRINCIPLES OF NATURAL JUSTICE OR WITHOUT APPLICATION OF MIND .... MR. ABRAHAM RELIED ON THE JUDGMENT OF THE DIVISION BENCH OF THE HIGH COURT OF MADRAS IN VENKNTAKRISHNA RICE COMPANY V. CIT [1987] 163 ITR 129 INTERPRETING 'PREJUDICIAL TO THE INTERESTS OF THE R EVENUE.' THE HIGH COURT HELD (PAGE 138) : 'IN THIS CONTEXT, IT MUST BE REGARDED AS INVOLVING A CONCEPTION OF ACTS OR ORDERS WHICH ARE SUBVERSIVE OF THE ADMINIST RATION OF REVENUE. THERE MUST BE SOME GRIEVOUS ERROR IN THE ORDER PASS ED BY THE INCOME- TAX OFFICER, WHICH MIGHT SET A BAD TREND OR PATTERN FOR SIMILAR ASSESSMENTS, WHICH ON A BROAD RECKONING, THE COMMIS SIONER MIGHT THINK TO BE PREJUDICIAL TO THE INTERESTS OF THE REV ENUE ADMINISTRATION. IN OUR VIEW, THIS INTERPRETATION IS TOO NARROW TO M ERIT ACCEPTANCE. THE SCHEME OF THE ACT IS TO LEVY AND COLLECT TAX IN ACC ORDANCE WITH THE ITA NO.1493/KOL/2013 BISAKHA SALES PVT. LTD. ASSESSMENT YEAR: 2008 -09 25 PROVISIONS OF THE ACT AND THIS TASK IS ENTRUSTED TO THE REVENUE IF DUE TO AN ERRONEOUS ORDER OF THE INCOME-TAX OFFICER, THE REVE NUE IS LOSING_ TAX LAWFULLY PAYABLE BY A PERSON, IT WILL CERTAINLY BE PREJUDICIAL TO THE INTERESTS OF THE REVENUE. 7.17 WE HAVE EXTRACTED ONLY SUCH PORTION AS ARE REL EVANT TO THE ISSUE OF THE REVISION UNDER SECTION 263. ON THE TOUCHSTONE TEST OF THESE DECISIONS, WE ARE OF THE VIEW THAT EVEN ON JURISDICTION THE LD. CIT HAS RIGH TLY INVOKED HER POWERS UNDER SECTION 263 OF THE ACT AND THE SAME IS UPHELD. 7.18 WE ARE NOT TAKING REFERENCE TO THE DECISION IN THE CASE OF STAR GRIHA PVT. LTD. IN ITA NO.1244/KOL/2013 DATED 14/08/2014 IN SO FAR AS THAT WAS A CASE IN WHICH THE ASSESSEE WAS UNREPRESENTED. 7.19 THE LD. DR HAS RAISED AN ISSUE THAT IN SOME CA SES, 263 PROCEEDINGS HAVE BEEN DROPPED BY THE LD. CIT BUT THE REVENUE HAS THE LIBERTY TO REOPEN THE ASSESSMENTS UNDER SECTION 148. THIS IS NOT AN ISSUE THAT ARISES IN THIS APPEAL AND THEREFORE WE WOULD NOT ADJUDICATE ON IT OTHER THAN SAYING THAT THE LIBERTIES AVAILABLE TO THE REVENUE CANNOT BE CONTROLLED BY AN APPELLATE AUTHORITY AS LONG AS THE REQUISITE CONDITIONS ASSOCIATED TO SUCH ACTIONS ARE COMPLIED WITH IN LETTER AND SPIRIT AFTER THE INTRODUCTION OF EXPLANATION 2 TO S ECTION 147. 7.20 THIS VIEW OF OURS ALSO FINDS SUPPORT FROM THE DECISION OF THE HONBLE GURAJAT HIGH COURT IN THE CASE OF YOGENDRA KUMAR GU PTA VS- ITO REPORTED IN 366 ITR 186 (GUJ) WHEREIN THE HONBLE GUJARAT HIGH COURT HAS HELD AS FOLLOWS: 18. AS MENTIONED HEREINABOVE, WE HAD CALLED FOR TH E ORIGINAL FILE, WHICH HAD REVEALED NEW, VALID AND TANGIBLE IN FORMATION SUPPORTING THE ASSESSING OFFICERS OPINION RECEIVED FROM THE DEPUTY COMMISSIONER OF INCOME-TAX, KOLKATA, BASED O N THE MATERIAL FOUND DURING THE SEARCH BY THE CBI, WHERE BASANT MARKETING PVT. LTD., IS SAID TO BE A DUMMY COMPANY OF ONE SHRI ARUN DALMIA. WHAT HAS BEEN EMPHASIZED BY THE LEARNED SENIOR COU NSEL APPEARING FOR THE PETITIONER IS THAT THE ASSESSING OFFICER HAD ATTEMPTED TO FILL IN THE GAP BY TERMING THE AMOUNT RECEIVED FROM BASANT MARKETING PVT. LTD. AS ACCOMMODATION ENTRY , WHICH SHE ITA NO.1493/KOL/2013 BISAKHA SALES PVT. LTD. ASSESSMENT YEAR: 2008 -09 26 COULD NOT HAVE DONE WITHOUT FURTHER INQUIRY/VERIFIC ATION. YET ANOTHER CONTENTION EMPHASIZED BY THE LEARNED SENIOR COUNSEL IS THAT THE POST-NOTICE CORRESPONDENCE MADE AFTER THE REASONS RECORDED COULD NOT HAVE ADDED ANYTHING WHICH WAS LA CKING IN THE REASONS THEMSELVES. HE URGED THAT IN THE ABSENCE OF ANY STATEMENT GIVEN BY ANY DIRECTOR OF BASANT MARKETING PVT. LTD. STATING THAT THE ASSESSEE RECEIVED AND OBTAINED ACCOMMODATION ENTRY IN THE FORM OF LOANS AND ADVANCES, THE REASONS LACK BASIS. THE DIRECTOR, MR. DALMIA OF BASANT MARKETING PVT. LTD. AS CONTENDED A LSO DOES NOT REVEAL ANYWHERE AND, THEREFORE, IT IS PREMATURE ON THE PART OF THE ASSESSING OFFICER TO SO RECORD THE REASONS. IT IS F URTHER URGED THAT THE AFFIDAVIT OF RISHABH DALMIA STATING ON OATH THA T THE LOAN TRANSACTIONS WITH THE PETITIONER ARE GENUINE FOR HA VING BEEN CARRIED OUT ONLY THROUGH CHEQUES, PRIMA FACE VINDIC ATES THAT THE ENTIRE EXERCISE IS BASED ON SUSPICION. THE ENTIRE T HRUST, THEREFORE, IS THAT ISSUANCE OF NOTICE IS NOTHING BUT A FISHING INQUIRY. AS DISCUSSED AT LENGTH WHILE ADVERTING TO THE LAW, THAT SUFFICIENCY OF REASONS RECORDED BY THE ASSESSING OF FICER NEED NOT BE GONE INTO BY THIS COURT. OF COURSE, THE ASSESSIN G OFFICER WHEN FORMS HIS BELIEF ON THE BASIS OF SUBSEQUENT NEW AND SPECIFIC INFORMATION THAT THE INCOME CHARGEABLE TO TAX HAS E SCAPED ASSESSMENT ON ACCOUNT OF OMISSION ON THE PART OF T HE ASSESSEE TO MAKE FULL AND TRUE DISCLOSURE OF PRIMARY FACTS, HE MAY START REASSESSMENT PROCEEDINGS AS FRESH FACTS REVEALED TH E NON- DISCLOSURE FULL AND TRUE SUCH FACTS WERE NOT PREVIO USLY DISCLOSED OR IT CAN BE SAID THAT IF PREVIOUSLY DISCLOSED, THEY E XPOSE UNTRUTHFULNESS OF FACTS REVEALED. THE ASSESSING OFFICER REQUIRED JURISDICTION TO REOP EN UNDER SECTION 147 READ WITH SECTION 148 OF THE ACT, WHERE THE INFORMATION MUST BE SPECIFIC AND RELIABLE. AS HELD BY THE APEX COURT IN THE CASE OF PHOOL CHAND BAJRANG LAL (SUPRA), SINCE THE BELIE F IS THAT OF THE INCOME-TAX OFFICER, THE SUFFICIENCY OF REASONS FOR FORMING THE BELIEF, IS NOT FOR THE COURT TO JUDGE BUT IS OPEN T O AN ASSESSEE TO ESTABLISH THAT THERE EXISTS NO BELIEF OR THAT THE B ELIEF IS NOT AT ALL A BONA FIDE ONE OR BASED ON VAGUE, IRRELEVANT AND NON -SPECIFIC INFORMATION. TO THAT LIMITED EXTENT, THE COURT MAY LOOK AT THE VIEW TAKEN BY THE INCOME-TAX OFFICER AND CAN EXAMINE WHE THER ANY MATERIAL IS AVAILABLE ON RECORD FROM WHICH THE REQU ISITE BELIEF COULD BE FORMED BY THE ASSESSING OFFICER AND WHETHE R THAT MATERIAL HAS ANY RATIONAL CONNECTION OR A LIVE LINK WITH THE FORMATION OF THE REQUISITE BELIEF. IT IS ALSO IMMATERIAL THAT AT THE TIME OF MAKING THE ORIGINAL ASSESSMENT, THE ASSESSING OFFICER COULD HA VE FOUND BY FURTHER INQUIRY OR INVESTIGATION AS TO WHETHER THE TRANSACTIONS WERE ITA NO.1493/KOL/2013 BISAKHA SALES PVT. LTD. ASSESSMENT YEAR: 2008 -09 27 GENUINE OR NOT. IF ON THE BASIS OF SUBSEQUENT VALID INFORMATION, THE ASSESSING OFFICER FORMS A REASON TO BELIEVE ON SATI SFYING THE TWIN CONDITIONS PRESCRIBED UNDER SECTION 147 OF THE ACT THAT NO FULL AND TRUE DISCLOSURE OF FACTS WAS MADE BY THE ASSESSEE A T THE TIME OF ORIGINAL ASSESSMENT AND, THEREFORE, THE INCOME CHAR GEABLE TO TAX HAD ESCAPED ASSESSMENT, HIS BELIEF AND THE NOTICE O F REASSESSMENT BASED ON SUCH BELIEF/OPINION NEEDS NO INTERFERENCE. IN THE PRESENT CASE, SINCE BOTH THE NECESSARY CONDI TIONS HAVE BEEN DULY FULFILLED, SUFFICIENCY OF THE REASONS IS NOT TO BE GONE INTO BY THIS COURT. THE INFORMATION FURNISHED AT THE TIM E OF ORIGINAL ASSESSMENT, WHEN BY SUBSEQUENT INFORMATION RECEIVED FROM THE DEPUTY COMMISSIONER OF INCOME-TAX, KOLKATA ITSELF F OUND TO BE CONTROVERTED, THE OBJECTION TO THE NOTICE OF REASSE SSMENT UNDER SECTION 147 OF THE ACT MUST FAIL AT THE COSTS OF IN GEMINATION, IT NEEDS TO BE MENTIONED THAT AT THE TIME OF SCRUTINY ASSESSMENT, A SPECIFIC QUERY WAS RAISED WITH REGARD TO UNSECURED LOANS AND ADVANCES RECEIVED FROM THE SAID COMPANY, NAMELY, BA SANT MARKETING PVT. LTD. BASED AT KOLKATA. THESE BEING T HE TRANSACTIONS THROUGH THE CHEQUES AND DRAFTS, THERE WOULD ARISE N O QUESTION OF THE ASSESSING OFFICER NOT ACCEPTING SUCH VERSION OF THE ASSESSEE AND NOT TREATING THEM AS GENUINE LOANS AND ADVANCES . FURNISHING THE DETAILS OF NAMES, ADDRESSES, PANS, ETC., ALSO W OULD LOSE ITS RELEVANCE IF SUBSEQUENTLY FURNISHED INFORMATION, WH ICH HAS BEEN MADE BASIS FOR ISSUANCE OF NOTICE IMPUGNED, CONCLUD ES THAT BASANT MARKETING PVT. LTD. IS MERELY A DUMMY COMPANY OF ON E SHRI ARUN DALMIA, WHICH PROVIDED THE ACCOMMODATION ENTRIES TO VARIOUS BENEFICIARIES. THIS COURT HAS EXAMINED THE BELIEF OF THE ASSESSING OFFICER TO A LIMITED EXTENT TO INQUIRY AS TO WHETHER THERE WAS SUFFICIENT MATERIAL AVAILABLE ON RECORD FOR THE ASSESSING OFFI CER TO FORM A REQUISITE BELIEF WHETHER THERE WAS A LIVE LINK EXIS TING OF THE MATERIAL AND THE INCOME CHARGEABLE TO TAX THAT ESCA PED ASSESSMENT. THIS DOES NOT APPEAR TO BE THE CASE WHE RE THE ASSESSING OFFICER ON VAGUE OR UNSPECIFIC INFORMATIO N INITIATED THE PROCEEDINGS OF REASSESSMENT, WITHOUT BOTHERING TO F ORM HIS OWN BELIEF IN RESPECT OF SUCH MATERIAL. WE NEED TO NOTI CE THAT THE JOINT DIRECTOR CBI, MUMBAI, INTIMATE TO THE DIT (INVESTIG ATION), MUMBAI. A CASE IS REGISTERED AGAINST MR. ARUN DALMI A, HARSH DALMIA AND DURING THE SEARCH AT THEIR RESIDENCE AND OFFICE PREMISES, THE SUBSTANTIAL MATERIAL INDICATED THAT 2 0 DUMMY COMPANIES OF MR. ARUN DALMIA WERE ENGAGED IN MONEY LAUNDERING AND THE INCOME-TAX EVASION. THE SAID ENTITIES INCLU DED BASANT MARKETING PVT. LTD. ALSO. FORM THE ANALYSIS OF DETA ILS FURNISHED ITA NO.1493/KOL/2013 BISAKHA SALES PVT. LTD. ASSESSMENT YEAR: 2008 -09 28 AND THE BENEFICIARIES REFLECTED, WHICH ARE SPREAD A CROSS THE COUNTRY, THE COMMISSIONER OF INCOME-TAX, KOLKATA, S USPECTED THE ACCOMMODATION ENTRY RELATED TO THE ASSESSMENT YEAR 2006-07 AS WELL, THIS INFORMATION HAS BEEN PROVIDED TO THE DIR ECTOR GENERAL OF INCOME-TAX, KOLKATA, WHO IN TURN, COMMUNICATED TO T HE CHIEF COMMISSIONER O INCOME-TAX, AHMEDABAD. FURTHER REVEL ATION OF INVESTIGATION AS COULD BE NOTICED FROM THE RECORD E XAMINED (FILE) DESERVES NO REFLECTION IN THIS PETITION. INSISTENCE ON THE PART OF THE PETITIONER TO PROVIDE ANY FURTHER MATERIAL FORMING THE PART OF INVESTIGATION CARRIED OUT AGAINST DALMIAS ALSO NEED S TO MEET WITH NEGATION, AS THE LAW REQUIRES SUPPLY OF INFORMATION ON WHICH ASSESSING OFFICER RECORDED HER SATISFACTION, WITHOU T NECESSITATING SUPPLY OF ANY SPECIFIC DOCUMENTS. THE PROCEEDINGS I NITIATED UNDER SECTION 147 OF THE ACT WOULD NOT BE RENDERED VOID A ND NON-SUPPLY OF SUCH DOCUMENT FOR WHICH CONFIDENTIALITY IS CLAIM ED AT THIS STAGE, FOLLOWING THE DECISIONS OF THE DELHI HIGH COURT IN THE CASE OF ACORUS UNITECH WIRELESS (P.) LTD. (SUPRA). THE ASSU MPTION OF JURISDICTION ON THE PART OF THE ASSESSING OFFICER I S SINCE BASED ON FRESH INFORMATION, SPECIFIC AND RELIABLE AND OTHERW ISE SUSTAINABLE UNDER THE LAW, CHALLENGE TO REASSESSMENT PROCEEDING S WARRANT NO INTERFERENCE . REFERENCE TO THE ABOVE QUOTED OBSERVATIONS IN THE J UDGMENT SHOWS THAT THE EXERCISE OF THE JURISDICTION HAS NOT BEEN LIMITED TO THE DEFECT OF JURISDICTION. IT COULD EXTEND TO AN ORDER WHICH MAY BE FOUND TO BE 'ERRONEOUS' OR 'NOT IN ACCORDANCE WITH LAW' F OR HAVING BEEN PASSED 'WITHOUT MAKING ANY ENQUIRY IN UNDUE HASTE'. THE 'JURISDICTIONAL' DEFECT HAS BEEN REFERRED TO IN THA T SENSE. ONLY LIMITATION LAID DOWN IS THAT THE ORDER COULD NOT BE REVISED WITHOUT THE SAME BEING 'ERRONEOUS' MERELY BECAUSE A DIFFERENT V IEW COULD ALSO BE TAKEN. IT HAS NOT BEEN HELD THAT EVEN AN ORDER P ASSED, IGNORING NORMS OR MATERIAL COULD NOT BE INTERFERED WITH UNDE R SECTION 263 OF THE ACT. IT IS WELL KNOWN THAT THE WORD 'JURISDICTION' DOES NOT HAVE A FIXED MEANING. THOUGH IN ONE SENSE IT MEANS ENTITLE MENT TO ENTER UPON THE ENQUIRY IN QUESTION AND IN WIDER SENSE IT IMPLIES LIGHT TO CONDUCT ENQUIRY INTO THE MATTER IN LAWFUL MANNER. E VEN IF THERE IS JURISDICTION TO GO INTO A MATTER, FAILURE TO HAVE R EGARD TO THE RELEVANT MATERIAL MAY ALSO RENDER AN ORDER WITHOUT JURISDICT ION. WE HAVE ALREADY REFERRED TO THE JUDGMENTS OF THIS C OURT IN RAJENDRA SINGH [1990] 79 SIC 10 (GAUHATI) AND TWO SINGLE BEN CH JUDGMENTS FOLLOWING THE SAID JUDGMENT IN BONGAIGAON REFINERY AND PETROCHEMICALS LTD. [2006] 287 ITR 120 (GAUHATI) AND SHYAM SUNDAR AGARWAL [2003] 131 STC 70 (GAUHATI) AS ALSO THE SECOND DIVI SION BENCH JUDGMENT IN DAGA ENTRADE P. LTD. [2010] 327 ITR 467 ITA NO.1493/KOL/2013 BISAKHA SALES PVT. LTD. ASSESSMENT YEAR: 2008 -09 29 (GAUHATI). NO DOUBT, IN RAJENDRA SINGH [1990] 79 STC 10 (GAUHATI), AN OBSERVATION WAS MADE THAT ERRONEOUS ASSESSMENT REFE RRED TO THE DEFECT WHICH IS JURISDICTIONAL IN NATURE, AS AGAINS T SUBSTITUTION OF ONE VIEW FOR THE OTHER, MERELY ON THE GROUND THAT A DIF FERENT VIEW WAS POSSIBLE. IF READ AS A WHOLE. THE JUDGMENT DOES NOT EXCLUDE ERROR IN ASSESSMENT ORDER, BY IGNORING RELEVANT MATERIAL. NO T HOLDING SUCH INQUIRY AS IS NORMAL AND NOT APPLYING MIND TO THE R ELEVANT MATERIAL WOULD CERTAINLY BE ERRONEOUS' ASSESSMENT WARRANTIN G EXERCISE OF REVISIONAL JURISDICTION. JUDGMENT HAS TO BE READ AS A WHOLE AND AN OBSERVATION DURING THE COURSE OF REASONING IN THE J UDGMENT SHOULD NOT BE DIVORCED FROM THE CONTEXT IN WHICH IT WAS US ED. THE JUDGMENT IS NEITHER TO BE INTERPRETED AS AN ACT OF PARLIAMEN T NOR AS A HOLY BOOK. IF THIS PRINCIPLE IS KEPT IN MIND, WE DO NOT FIND ANY CONFLICT IN THE VIEW TAKEN IN RAJENDRA SINGH [1990] 79 STC 10 (GAUHATI) AND DAGA ENTRADE P. LTD. [2010] 327 ITR 467 (GAUHATI). DISAGREEMENT IN DAGA ENTRADE P. LTD. [2010] 327 ITR 467 (GAUHATI) IS ONLY TO THE INTERPRETATION WHICH LIMITS THE RATIO OF THE JUDGME NT BY RELYING ONLY ONE SENTENCE IN ISOLATION DIVORCED FROM THE ENTIRE JUDGMENT. AN INCORRECT ASSUMPTION OF FACTS OR AN INCORRECT APPLI CATION OF LAW WILL SATISFY THE REQUIREMENT OF THE ORDER BEING' ERRONEO US' NON- APPLICATION OF MIND AND OMISSION TO FOLLOW NATURAL JUSTICE ARE IN SAME CATEGORY. ACCORDINGLY, WE HOLD THAT DAGA ENTRADE P. LTD. [2010] 327 ITR 467 (GAUHATI) LAYS DOWN CORRECT LAW AND THE SAME IS NOT IN CONFLICT WITH THE EARLIER ORDER OF TH IS COURT M R AJENDRA SINGH [ 1990] 79 STC 10 (GAUHATI). JURISDICTION UNDER SECTION 263 CAN BE EX ERCISED WHENEVER IT IS FOUND THAT THE ORDER OF ASSESSMENT WAS ERRONE OUS AND PREJUDICIAL TO THE INTERESTS OF THE REVENUE. CASES OF ASSESSMEN T ORDER PASSED ON WRONG ASSUMPTION OF FACTS, OR INCORRECT APPLICATION OF LAW, WITHOUT DUE APPLICATION OF MIND OR WITHOUT FOLLOWING THE PR INCIPLES OF NATURAL JUSTICE ARE NOT BEYOND THE SCOPE OF SECTION 263 OF THE ACT. 7.21 A PERUSAL OF THE CONSEQUENTIAL ASSESSMENT ORDE R PASSED IN THE PRESENT CASE ON 31/3/2014 SHOWS THAT THE ASSESSEE HAS ALSO NOT C OOPERATED IN THE ASSESSMENT PROCEEDINGS BUT IN THE FIRST APPEAL HAS BEEN RAISIN G ALLEGATIONS AGAINST THE AO THAT HE HAS NOT ACCEPTED DOCUMENTS SUBMITTED AND HAS NOT GRANTED ADEQUATE OPPORTUNITY. THIS ALSO CLEARLY SHOWS THE EVASIONARY TACTICS THAT ARE BEING ADOPTED TO WRIGGLE ITS WAY OUT OF THE CORNER IT HAS PUT ITS ELF INTO BY ITS OWN ACTS AND COMMISSIONS. A PECULIARITY IN SUCH CASES THAT IS NO TICED IS THAT SHEAVES OF PAPER DOCUMENTS ARE READILY PRODUCED BUT WHEN A SUMMON IS ISSUED THE RESPONSIBLE ITA NO.1493/KOL/2013 BISAKHA SALES PVT. LTD. ASSESSMENT YEAR: 2008 -09 30 PERSONS CONVENIENTLY DISAPPEAR. ONLY THE ASSESSEE K NOWS THE INTRICACIES OF ITS ACCOUNTS. IT IS FOR THE ASSESSEE TO PROVE ITS CLAIM OF SHARE CAPITAL/ APPLICATION MONEY INTRODUCTION AND ITS AFFAIRS IN RESPECT OF IT S ACCOUNTS. MERELY DUMPING PAPERS AND DOCUMENTS ON THE TABLE OF THE ASSESSING AUTHORITY DOES NOT IN ANY WAY MEAN COMPLIANCE. THE BURDEN OF PROOF CANNOT BE SHIF TED ON THE REVENUE BY CART LOADS OF DOCUMENTS. THE DOCUMENTS SUBMITTED MUST BE EXPLAINED. WE DO UNDERSTAND THE PREDICAMENT OF THE ASSESSEE IN SO FA R AS IF ANY RESPONSIBLE PERSON APPEARS THEN HE WOULD HAVE TO ANSWER MANY UNPLEASAN T QUESTIONS WHICH COULD LEAD TO THE REOPENING OF ASSESSMENTS IN MULTIPLE AS SESSMENT YEARS AND MULTIPLE ASSESSEES. BUT THEN WHAT HAS BEEN CREATED AND KNOTT ED UP BY THE ASSESSEE MUST BE ANSWERED AND UNRAVELED ONLY BY THE ASSESSEE AND NON E ELSE WOULD KNOW THE FACTS BETTER THAN THE ASSESSEE ITSELF. 7.22 WE ARE LIVE TO THE FACT THAT SOME OF THE OBSER VATIONS IN THE ORDER ARE ACADEMIC IN NATURE. HOWEVER, THEY ARE JUST OUR EXPR ESSION OF DISTASTE TO THE FRAUDULENT ACTS DONE BY SUCH ASSESSEES WHICH HAS SE T A BAD TREND AND PATTERN FOR SUCH ACTS, THAT EVEN LURE HONEST TAX PAYERS TO WOND ER AS TO WHAT FAULT HAVE THEY DONE TO BEAR THE BURDEN OF TAX WHEN SUCH EVADERS GO SCOT FREE. IN THE CIRCUMSTANCES, THE APPEAL FILED BY THE ASSESSEE STA NDS DISMISSED. 8. IN THE RESULT, THE APPEAL FILED BY THE ASSESSEE IS DISMISSED. THIS ORDER IS PRONOUNCED IN THE COURT ON 19 TH SEPTEMBER, 2014. SD/- SD/- (SHAMIM YAHYA) (GEORGE MATHAN) ACCOUNTANT MEMBER JUDICIAL MEMBER DATED : 19 TH SEPTEMBER, 2014 TALUKDAR(SR.P.S.) ITA NO.1493/KOL/2013 BISAKHA SALES PVT. LTD. ASSESSMENT YEAR: 2008 -09 31 COPY OF THE ORDER FORWARDED TO: 1. M/S. BISAKHA SALES PVT. LTD., 72, MANOHAR DAS STREE T, KOLKATA 700 007 2 CIT (KOL-II), KOLKATA 3. THE CIT(A), 4. CIT, 5. DR, TRUE COPY, BY ORDER, ASSTT. REGISTRAR , ITAT, KOLKATA