Rivet Electricals Pvt Ltd, Delhi V. Pr.CIT- Faridabad, Faridabad

ITA 1885/DEL/2022

AI Insights

The case involves M/s. Rivet Electricals Pvt. Ltd., which appealed against the order of the Principal Commissioner of Income Tax, Faridabad, under section 263 of the Income Tax Act, 1961. The PCIT had set aside the assessment order passed under section 143(3), claiming it was erroneous and prejudicial to the interest of the Revenue, primarily due to inadequate inquiry into the genuineness and creditworthiness of certain investor companies. The Tribunal, referencing a similar case involving the same investor companies, quashed the PCIT's order, noting that the Assessing Officer had adequately investigated the issues during the original assessment.

• Counselvise Citation: [2023] 140 COUNSELVISE.COM (IT) 130892 (ITAT-DELHI)
• Duration Of Justice: 1 year(s) 11 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 29-08-2023
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: F
• Next Hearing Date: 07-06-2023
• Assessment Year: 2015-2016
• Appeal Filed On: 17-08-2022
• Other Referred Cases: ITA No. 6225/Del/2019, ITA No. 6255/Del/2019
• Laws Referred To: Income Tax Act, 1961
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Keywords: Revision of order; Share purchase agreement; Valuation report; Set aside; FORM 26AS
• Section: 263; 143(3); 142(1); 143(1)

Judgement Text

Page 1 of 7 IN THE INCOME TAX APPELLATE TRIBUNAL DELHI BENCH ‘F’: NEW DELHI BEFORE, DR. B.R.R.KUMAR, ACCOUNTANT MEMBER AND SHRI YOGESH KUMAR U.S., JUDICIAL MEMBER ITA No.1885/Del/2022 (ASSESSMENT YEAR 2015-16) M/s. Rivet Electricals Pvt. Ltd., C/o IPSO Legal H-35, 1 st Floor, Jangpura Extension, New Delhi-110 014 PAN-AAFCR 8803C Vs. Pr. CIT, Faridabad Haryana 121002 (Appellant) (Respondent) Appellant by Mr. Rajiv Saxena, and Mr. Dishant Sethi, Advocates Respondent by Mr. T. Kipgen, CIT-DR Date of Hearing 08/06/2023 Date of Pronouncement 30/08/2023 ORDER PER YOGESH KUMAR U.S., JM: This appeal has been filed by Assessee against the order passed by the Learned Principal Commissioner of Income Tax, Faridabad [“Ld. Pr. CIT”, for short], dated 28/08/2019 for Assessment Year 2015-16. 3. The grounds raised by assessee in this Appeal which are as under: “1. That the Ld. Pr. Commissioner of Income Tax erred in law and on facts in assuming jurisdiction u/s 263 of the Act IT Act, 1961 by setting aside the assessment made u/s 263 without appreciating: a. that the assessment order was passed after verification and due enquiry as required under the Act during the course of the assessment ITA Nos. 1885/Del/2022 Rivet Electricals Pvt. Ltd. vs. Pr.CIT Page 2 of 7 b. that assumption of jurisdiction cannot be made merely on surmises, conjectures and misconceived premise. c. that neither there was any adverse material in respect of credits received by the assessee, found by the AO nor by the Pr. CIT u/s 263 before initiating the proceeding as no enquiry was made by Pr. CIT in arriving at conclusion which is contrary in view of the jurisdictional and other High Courts and the Apex Court. d. that once the sums have been received through banking channels and complete evidences was provided during the course of the assessment, suspicion raised purely on assumptions is wholly unsustainable in law. 2. That without having any material on record the assessment order passed u/s 143(3) of the Act accepting the returned income filed by assessee being neither erroneous nor prejudicial to the interest of revenue and as such the order passed u/s 263 of the Act directing to make a fresh assessment is without any basis, bad in law and liable to be quashed. The above grounds are without prejudice and independent of each other. Appellant craves leave to amend, add or modify any of the above grounds of appeal during the course of hearing.” 3. There is a delay of 1025 days in filing the present appeal. The assessee filed an application for condoning the delay on the ground of the ‘Covid Situations’ by taking shelter under the order of the Hon'ble Supreme Court in Re: Cognizance for extension of limitation made in Writ Petition (C) No. 3 of 2020 and submitted that due to post Covid pandemic situations, the earlier counsel due to his serious illness on account of highly diabetic condition, unable to file the Appeal on time, therefore prayed for condoning the delay in filing the present appeal. For the reasons stated in the application for condonation of delay, the delay in filing the present appeal is condoned. ITA Nos. 1885/Del/2022 Rivet Electricals Pvt. Ltd. vs. Pr.CIT Page 3 of 7 4. Brief facts of the case are that, the assessee filed returned declaring income of Rs. 1,78,430/- the same was processed u/s 143(1) of the Act, subsequently case was selected for limited scrutiny and an order u/s 143(3) of the Act came to be passed accepting the returned income. Vide order dated 28/08/2019 an order u/s 263 of the Act came to be passed by the Pr. Commissioner of Income Tax (‘PCIT’) declaring that the assessment order made u/s 143(3) of the Act dated 12/04/2017 is erroneous and also prejudicial to the interest of the Revenue and cancelled the assessment order. Further, the Ld. PCIT directed the A.O. to make proper enquiries to verify the issues before completing the assessment. Aggrieved by the order dated 28/08/2019, the assessee preferred the present Appeal on the grounds mentioned above. 5. The Ld. Counsel for the assessee submitted that the Ld. PCIT committed error in passing the order impugned without appreciating the fact that the assessment order was passed after verification and due enquiry as required under the Act, the assumption of jurisdiction cannot be made by the PCIT merely on surmises, conjectures and misconceived premise. Further submitted that in the Assessee’s own case in ITA No. 6225/Del/2019- for Assessment Year 2014-15, the order passed u/s 263 of the Act wherein very same investors issue was involved which has been quashed by the Tribunal, therefore submitted that the order of the PCIT is liable to be set aside. ITA Nos. 1885/Del/2022 Rivet Electricals Pvt. Ltd. vs. Pr.CIT Page 4 of 7 6. Per contra, the Ld. Departmental Representative by relying on the order of the PCIT submitted that the order impugned has been passed by the PCIT in accordance with law, which requires no interference and the Appeal is liable to be set aside. 7. We have heard both the parties and perused the material available on record. It is seen from the record that the Ld. A.O. during the assessment proceedings issued notice u/s 142(1) of the Act requiring to furnish the relevant information and details and also issued notice/questionnaire for ongoing assessment proceedings u/s 143(3) of the Act. In response, a detailed reply submitted by the assessee along with the documents such as ITR along with computation of income of the Assessee Company, Auditors report, statement of profit and loss and balance sheet for the year ending March 2015. The assessee has also submitted one more reply on 10/04/2017 along with following documents and the same have been reproduced before us in the paper book, which are as under:- • Bank account statement along with the Bank Book of assessee company. • Form PAS-3 along with List of allotees. • Share Certificate issued by assessee co. in favour of M/s Rishikesh Buildcon Pvt. Ltd., M/s Metalcity Constructions Kovai Pvt. Ltd. and M/s Goodluck Industries Ltd. (Investor companies) • ITR along with computation of income • Ledger confirmation of accounts • Balance Sheet and P/L • Valuation report • Form 26AS 16-19 20-23 24-26 27-32 33-50 51-83 84-85 86-87 ITA Nos. 1885/Del/2022 Rivet Electricals Pvt. Ltd. vs. Pr.CIT Page 5 of 7 8. After verifying the above documents, the total income returned by the assessee was accepted by the A.O. The Ld. CIT(A) while exercising power conferred u/s 263 of the Act was of the opinion that the Assessing Officer has not made any enquiry with regard to genuineness and creditworthiness of the investor Companies i.e. Share Premium of Rs. 45,00,000/- from M/s Metal city Construction Pvt. Ltd. and M/s Rishikesh Buildcon Pvt. Ltd. Accordingly, the Ld. PCIT, revised the assessment order, vide order dated 28/08/2019 by exercising the power conferred u/s 263 of the Act. 9. It is pertinent to observe that the similar order was passed u/s 263 of the Act by the PCIT on 29/03/2019 for the A.Y 2014-15 and as against the said order, the assessee preferred an appeal before the ITAT and the Coordinate Bench of the Tribunal vide order dated 15/11/2022 in ITA No. 6255/Del/2019 (A.Y 2014-15) quashed the order of the PCIT passed u/s 263 of the Act wherein various Companies investments including M/s Metal City Construction Pvt. Ltd. and M/s Rishikesh Buildcon Pvt. Ltd. have been examined and held as under:- “13. In the case in hand in sum and substance, the contention of Ld. Counsel for the assessee is that order so revised by Ld. Pr. CIT is not erroneous and prejudicial of the interests of the Revenue. The Ld. Pr. CIT has revised the assessment primarily on the ground that the AO had completed the scrutiny assessment without making any requisite verification. He further observed that AO did not make any ITA Nos. 1885/Del/2022 Rivet Electricals Pvt. Ltd. vs. Pr.CIT Page 6 of 7 inquiry to examine the genuineness of claim of the assessee. However, Ld. Counsel for the assessee has pointed out that AO had carried out requisite inquiry regarding genuineness of claim of the assessee regarding share application money. We find that the AO issued detailed questionnaire to the assessee and in response thereto, the assessee made submissions and also submitted the valuation arrived at as per Rule 11 UA of the Income Tax Rules, 1962. Ld. Pr. CIT has not pointed out that the valuation of shares as arrived at by the assessee, is not correct. In absence of such finding and coupled with the fact that the Ld. Pr. CIT did not revise the order on the basis which notice u/s 263 of the Act was issued. Moreover, there is no specific finding above the prejudice being caused to the Revenue. Therefore, in the absence of a specific finding by Ld. Pr. CIT regarding both the conditions i.e. order is erroneous and prejudicial to the interest of Revenue, the impugned order cannot be sustained as it fails the test of law. Therefore, respectfully following the binding precedents, we hereby set aside the impugned order and restore the original assessment order. Thus, grounds raised by the assessee are allowed.” 10. Considering the fact that the issue regarding the share premium and share capital from M/s Metalcity Construction Pvt. Ltd. and M/s Rishikesh Buildcon Pvt. Ltd. have been already examined by the Tribunal for Assessment Year 2014-15, wherein the order revising the assessment order u/s 263 of the ITA Nos. 1885/Del/2022 Rivet Electricals Pvt. Ltd. vs. Pr.CIT Page 7 of 7 Act was quashed by the Tribunal and apart from the same, even in the year consideration, since the assessee had furnished all the relevant documents pertaining to investments before the A.O., during the assessment proceedings, the impugned order made by the PCIT u/s 263 of the Act dated 28/08/2019 is liable to be set aside, accordingly we allow the grounds of Appeal of the assessee and the impugned order made u/s 263 of the Act by the PCIT is set aside and the Appeal of the assessee stands allowed. Order pronounced in open Court on 30 th August, 2023 Sd/- Sd/- (DR. B.R.R.KUMAR) (YOGESH KUMAR U.S.) ACCOUNTANT MEMBER JUDICIAL MEMBER Dated: 30/08/2023 Pk/R.N Sr.ps Copy forwarded to: 1. Appellant 2. Respondent 3. CIT 4. CIT(Appeals) 5. DR: ITAT ASSISTANT REGISTRAR ITAT, NEW DELHI