M/s. Rozelle Sales & Services Pvt. Ltd., , Kolkata V. ACIT, Central Circle - 1(1), , Kolkata

ITA 2030/KOL/2018

• Counselvise Citation: [2019] 116 COUNSELVISE.COM (IT) 2781 (ITAT-KOLKATA)
• Duration Of Justice: 11 month(s) 5 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 30-08-2019
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: A
• Assessment Year: 2010-2011
• Appeal Filed On: 25-09-2018
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: A K NAYAK
• Assessee Lawyers: SUNIL SURANA CA
• Keywords: Reopening of assessment; Unexplained cash credit; Unexplained investment; Income from undisclosed sources; Tangible material; Accommodation entries; Assessment record; Reason to believe; Reassessment proceedings; Set aside
• Section: 143(3); 142(1); 133(6); 143(1); 143(2); 147; 68; 148; 263

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL A BENCH : KOLKATA [BEFORE HONBLE SHRI J. SUDHAKAR REDDY, AM & HONBLE SHRI S.S. GODARA, JM ] I .T . A NO. 2 030 /KOL/201 8 A.Y 20 10 - 11 M/S. ROZELLE SALES & SERVICES V/S. ACIT, CENTRAL CIRCLE - 1(1) PVT. LTD. KOLKATA PAN: A ABCR 4547H (APPELLANT) (RESPONDENT) FOR THE APPELLANT /ASSESSEE : SHRI SUNIL SURANA, CA, AR FOR THE RESPONDENT / DEPARTMENT : S/ SHRI A.K. NAYAK, CIT, DR AND SANKAR HALDER, SR.DR DATE OF HEARING : 14 - 05 - 2019 AND 30/8/2019 DATE OF PRONOUNCEMENT: 30 - 0 8 - 2019 ORDER SHRI S.S. GODARA, JM : 1. TH IS A SSESSEES APPEAL FOR ASSESSMENT YEAR 20 10 - 11 ARISES AGAINST THE PR INCIPAL C IT, CENTRAL - 1, KOLKATAS ORDER DATED 30 - 08 - 2018 REVISING THE REGULAR ASSESSMENT/RE - ASSESSMENT FRAMED IN ITS CASE ON 30.11.2017 THEREBY DIRECTING THE ASSESSING OFFICER TO FRAME A FRESH ASSESSMENT , EXERCISING REVISION JURISDICTION IN PROCEEDING U/S. 263 OF THE INCOME - TAX ACT, 1961 ( IN SHORT ACT). HEARD BOTH THE PARTIES. CASE FILE PERUSED. 2. WE START WITH BASIC RELEVANT FACT S. T HIS ASSESSEE IS A NON - BANKING FINANCE COMPANY NBFC IN SHORT. IT CARRIE S OUT INVESTMENTS AND TRADING IN SHARES AS WELL. THE ASSESSEE ITS RETURN DECLARING TOTAL INCOME OF RS.1 , 01 , 260/ - ON 28 - 09 - 2010. THE SAME STOOD SUMMARILY PROCESSED. 3. THE A SSESSMENT /RE - ASSESSMENT ORDER DATED 30 - 11 - 2017 FORMING SUBJECT MATTER. THE IMPUGNED 263 PROCEEDINGS REVEALS THAT THE DEPARTMENT HAD CARRIED OUT A SEARCH DATED 25 - 08 - 2015 IN M/S. GHAN S HYAM SARDA GROUP OF CASES. IT NOTICED THEREIN THAT 2 ITA NO. 2030/KOL/2018 A.Y 2010 - 11 M/S. ROZELLE SALES & SERVICES P.LTD. 2 SHRI GOPAL SARDA HAD CONTROLLED AND MANAG ED THE ASSESSEE NBFC . THE ASSESSEE HAD RAISED TOTAL SHARE CAPITAL OF RS. 5 CRORES DURING THE RELEVANT PREVIOUS YEAR. ONE SHRI SURESH KUMAR PANSUKHAS GOT RECORDED HIS STATEMENT DURING THE COURSE OF THE SAID SEARCH ADMITTING HIMSELF TO BE AN ENTRY OPERATOR CONTROLL ING AND MA NAG ING A NUMBER OF SHELL/JAMAKHARCHI COMPANIES. HE FURTHER DEPOSED THAT HAS COMPANIES M/S. P.R NIRYAT PVT. LTD, SUMAN VANIJYA PVT. LTD AND URCH TRADERS PVT. LTD . HAD INVESTED IN SHARES OF M/S NIL L AM PATHY TRACON PVT. LTD & M/S. ROZELLE SALES & SERVICES P.LTD . THE ASSESSING OFFICER NOTICED IN THIS FACTUAL BACKDROP THAT ONE OF ASSESSEE S (SEVENTEEN) SHARES SUBSCRIBER WAS M/S URCH TRADERS P.LTD. HE, THEREFORE, F RAMED REASONS TO BEFORE US THIS BACK DROP OF FACTS THAT THE ASSESSEE COMPANY HAD PLOUGHED BACK UNACCOUNTED INCOME AS SHARE CAPITAL THEREBY GIVING RISE AN INSTANCE OF THE TAXABLE INCOME HAVING ESCAPED ASSESSMENT. HE SET INTO TO MOTION SECTION 148/147 PROCEEDINGS VIDE RE - OPENING NOTICE SERVED ON THE ASSESSEE ON 30.03.2017 4. CASE FILE SUGGESTS THAT THE ASSESSEE FILED ITS RETURN ON 20 .04.20 17 IN RESPONSE TO SECTION 148 NOTICE . THE ASSESSING OFFICER THEN ISSUE D SECTION 133(6) NOTICE TO ALL OF THE ASSESSEE S SUBSCRIB ER COMPAN IES . THIRTEEN OUT OF SAID SEVENTEEN INVESTORS REPL IED TO HIS NOTICE. HIS NOTICES ISSUED TO M/S. SUMANGAL DEVELOPERS P.LTD. , NICE COMMOTRADE P.LTD, URCH TRADERS P.LTD AND DREAM GOODS P.LTD ., WHICH C A ME BACK UNSERVED WITH REMARK LEFT . . THE ASSESSING OFFICE THEN CALLED FOR THE ASSESSEE TO FILE THEIR FRE SH ADDRESSES. HE AGAIN ISSUED NOTICES TO ALL OF FOUR OF THEM. TH REE OF THE SAID INVESTORS EXCEPT M/S. URCH TRADERS P. LTD FILED REPLIES . 5. THE ASSESSING OFFICER FOUND DURING THE COURSE OF RE ASSESSMENT THAT THE ASSESSEE HAD RECEIVED A SUM OF RS.55 LAKHS AS SHARE CAPITAL SUBSCRIPTION FROM M/S. URCH TRADERS P.LTD. THE ASSESSEE IN TURN COULD NOT PRODUCE THE SAID INVEST OR PART Y . THE ASSESSING OFFICER QUOTED TH E ALL THE FOREGOING FACTS TO CONCLUDE THAT ASSESSEES SHARE CAPITAL COMING FROM M/S. URCH TRAD ERS P.LTD WAS IN FACT ITS UNACCOUNTED INCOME ROUTED 3 ITA NO. 2030/KOL/2018 A.Y 2010 - 11 M/S. ROZELLE SALES & SERVICES P.LTD. 3 THROUGH A SHELL/JAMAKHA R CHI ENTITY WHOSE GENUINENESS AND CREDIT WORTHINESS HA D NOT BEEN PROVED. HE THEREFORE TREATED THE ABOVE STATED SHARE CAPITAL SUBSCRIPTION OF RS. 55 LAKHS AS UNEXPLAINED CASH CRE DIT U/S. 68 OF THE ACT. 6. CASE FILE REVEALS THAT THE PCIT SOUGHT TO REVISE THE ABOVE RE - ASSESSMENT ON THE GROUND THAT THE SAME WAS ERRONEOUS CAUSING PREJUDICE INTEREST OF THE R EVENUE. HE TOOK NOTE OF ENTIRE FACTUAL BACKDROP OBSERVED THAT ASSESSEES INVESTORS HAD EITHER NO INCOME OR VERY NOMINAL INCOME (S) IN THEIR RETURNS AS THE AGAINST RESPECTIVE INVESTMENTS MADE IN ITS SHARE CAPITAL. AND THAT THE ASSESSING OFFICER HAD MADE NO FURTHER ENQU I RY AS TO HOW THESE COMPANIES HAD INVESTED HEAVY AMOUNT S. THE PCIT FUR T HER ALLEGED THAT THE ASSESSING OFFICER HAD ACCEPTED ASSESSEE COMPANYS SHARE APPLICATION SUBSCRIPTION WITHOUT PHYSICAL VERIFICATION BY WAY OF A FULL ENQUIRY DESPITE THE FACT THAT THEY HAD NO T EXISTED ON THE GIVEN ADDRESSES FOR CARRYING OUT THEIR BUSINESS ACTIVITIES. THE P CIT HAS ACCORDINGLY REVISED THE IMPUGNED RE - ASSESSMENT AS FOLLOWS: - 5. CONSIDERING THE ABOVE DECISION OF HON'BLE I TAT, KOLKATA, BENCH - B WHICH IS ALSO JURISDICTIONAL TRIBUNAL, I FIND THAT THE CASE OF THE PRESENT ASSESSEE I S A FIT CASE FOR REVISION U/S.263 BECAUSE IN ITS CASE ALSO, THE AO HAS MADE INADEQUATE ENQUIRY TO VERIFY THE GENUINENESS OF SHARE CAPITAL DESPITE THE PREMIUM IN THIS CASE BEING MUCH MORE HIGHER I.E.,RS.490/ - PER SHARE AS COMPARED TO RS.190/ - PER SHARE I N CASE OF SUBH L AKSHMI VANIJYA PVT. LTD.(SUPRA) AND THAT TOO, SUCH A HIGH PREMIUM HAS BEEN PAID BY ALL THE 17(SEVENTEEN) COMPANIES DESPITE THE FACT THAT THE ASSESSEE COMPANY IS INCURRING LOSSES. DESPITE THERE BEING A CLEAR FINDING BY THE SEARCH TEAM THAT ALL THE SHAREHOLDER COMPANIES ARE PAPER/JAMAKHARCHI COMPANIES, THE AO HAS ONLY RELIED UPON MAKING OF VERIFICATION BY ISSUING NOTICES U/S.133(6} AND NOT MAKING ANY FIELD ENQUIRY TO ASCERTAIN GENUINENESS OF THESE SHAREHOLDER COMPANIES. THE PATTERN TO PROV IDE FUNDS BY THESE PAPER/JARMAKHARCHI COMPANIES IS SIMILAR TO WHAT HAS BEEN ANALYZED BY THE VS. COMMISSIONER OF INCOME TAX - 1, KOLKATA (SUPRA) BECAUSE ALI THESE SHAREHOLDER COMPANIES DO NOT HAVE ANY SIGNIFICANT SOURCE OF INCOME BUT THEY HAVE MADE INVESTM ENT OF HUGE AMOUNT OF MONEY IN SHARE CAPITAL OF THE ASSESSEE COMPANY ONLY BY CIRCULATION OF CAPITAL FROM ONE COMPANY TO ANOTHER COMPANY. 4 ITA NO. 2030/KOL/2018 A.Y 2010 - 11 M/S. ROZELLE SALES & SERVICES P.LTD. 4 BEFORE ACCEPTING THE AMOUNT OF RSAA5 CRORE AS GENUINE INVESTMENT IN SHARE CAPITAL OF THE ASSESSEE COMPANY BY 16(SIXT EEN) COMPANIES OUT OF 17(SEVENTEEN} COMPANIES BEING PAPER/JAMAKHARCHI COMPANIES, THE AO HAS ONLY RELIED UPON THE REPLY SUBMITTED IN RESPONSE TO NOTICE U/S.133(6) AND DID NOT VERIFY THE CORRECTNESS OF THE REPLY BY MAKING FIELD ENQUIRIES AND HENCE, HIS AC CEPTANCE OF GENUINENESS OF TRANSACTION OF SUBSCRIPTION OF SHARE CAPITAL REMAINED IN DARK CLOUD BECAUSE OF INADEQUATE ENQUIRY MADE BY HIM. SUCH INADEQUATE ENQUIRY MADE BY HIM IS AS GOOD AS 'NO ENQUIRY' MAKING THE ORDER PASSED BY HIM AS ERRONEOUS AND PREJU DICIAL TO THE INTERESTS OF REVENUE AS HELD BY THE HON'BLE ITAT, KOLKATA, BENCH - B IN THE CASE OF SUBHLAKSHMI VANIJYA PVT. LTD. VS. COMMISSIONER OF INCOME TAX - L, KOLKATA (SUPRA). AS PER EXPLANATION 2 OF SECTION 263 ALSO, ANY ORDER IN THE OPINION OF THE PR. COMMISSIONER, IF PASSED WITHOUT MAKING ENQUIRIES OR VERIFICATION WHICH SHOULD HAVE BEEN MADE, SUCH ORDER SHALL BE DEEMED TO BE ERRONEOUS IN SO FAR AS IT IS PREJUDICIAL TO THE INTERESTS OF REVENUE AS PROVIDED IN CLAUSE (A) OF EXPLANATION 2. THEREFORE, I FOUND THAT THE ORDER PASSED BY THE ACIT, CENTRAL CIRCLE - L(L), KOLKATA U/S.147/143(3) OF THE INCOME TAX ACT, 1961 FOR A.YR.2010 - 11 DATED 30/11/2017 IS ERRONEOUS IN SO FAR IT IS PREJUDICIAL TO THE INTERESTS OF REVENUE AND HENCE, THIS ORDER IS REQUIRED TO B E REVISED AS PER THE PROVISION OF SECTION 263. 6. IN VIEW OF MY ABOVE FINDING, BEFORE PASSING REVISIONARY ORDER U/W.263 OF THE ACT, A NOTICE DATED 26/28.06.2018 HAS BEEN ISSUED TO THE ASSESSEE COMPANY CALLING FOR ITS EXPLANATION AS TO WHY THE ASSESSMEN T ORDER PASSED U/S.147/143(3) DATED 30/11/2017 FOR A.Y.2010 - 11 SHOULD NOT BE REVISED AS PER THE PROVISION OF SECTION 263 TO DETERMINE THE CORRECT TAXABLE INCOME OF THE ASSESSEE COMPANY AFTER EXAMINING THE GENUINENESS OF SHARE CAPITAL OF RS. 4.45 CRORE (I NCLUDING PREMIUM) SUBSCRIBED THROUGH 16(SIXTEEN) COMPANIES (EXCEPT RS.55 LAKH SHOWN IN THE NAME OF 17TH COMPANY, M/S. URCH TRADERS PVT. LTD., THAT IS ALREADY HELD BY THE AO AS UNEXPLAINED AND ADDED TO THE INCOME OF THE ASSESSEE). 7. IN RESPONSE TO MY ABOVE NOTICE, SRI S. M. SURANA, ADVOCATE, HEREINAFTER REFERRED AS LD. AR FILED A LETTER DATED 10.08.2018 ON BEHALF OF THE ASSESSEE AND THE SAME IS REPRODUCED AS UNDER : - IT IS SUBMITTED THAT THE RETURN FOR THE AFORESAID YEAR WAS FILED ON 28.09.2N10 BY THE ASSESSEE WHICH WAS PROCESSED UNDER SEC.143(1). SUBSEQUENTLY HOWEVER THE ASSESSMENT WAS REOPENED U/S.147 ON THE BASIS OF SOME SEARCH WHICH WAS CONDUCTED IN GHANSHYAM SARDA GROUP. IN R ESPONSE 5 ITA NO. 2030/KOL/2018 A.Y 2010 - 11 M/S. ROZELLE SALES & SERVICES P.LTD. 5 TO THE SAID NOTICE THE ASSESSEE FILED THE RETURN. THE LD. AO TOOK UP THE ASSESSMENT FOR SCRUTINY. IN THE COURSE OF SCRUTINY PROCEEDINGS THE LD. A O SPECIFICALLY CALLED THE DETAILS OF SHARE CAPITAL RAISED BY THE ASSESSEE. THE ASSESSEE DULY FILED A LL THE EVIDENCES INCLUDING ACKNOWLEDGEMENT OF FILING OF THE RETURN BY THE SHAREHOLDERS, THEIR AUDITED PROFIT AND LOSS ACCOUNT AND BALANCE SHEET THEIR BANK STATEMENTS, THE SOURCE OF INVESTMENT MADE BY THEM, THE DETAILS OF REGISTRATION OF SHAREHOLDER COMP ANIES WITH THE REGISTRAR OF COMPANIES, THE EVIDENCE OF EXISTENCE OF THE COMPANIES AT THE GIVEN ADDRESS AND COPY OF PAN AND THE PARTICULARS AND DETAILS OF THE DIRECTORS. THE AO ISSUED NOTICE U/S.131/133(6) TO THE SHAREHOLDERS AND EXAMINED THE SAME THOROU GHLY. IT IS ONLY THEREAFTER THAT THE AQ FOUND THAT THE SUM OF RS.55 LAKHS BEING SHARE CAPITAL RECEIVED FROM URCH TRADERS WAS NOT EXPLAINED BY THE ASSESSEE. THEREFORE, THE LD. AO ADDED BACK THE SAID AMOUNT AS INCOME: THE ASSESSEE HAS ALREADY FILED AN APP EAL BEFORE THE LD. CIT( A) ON 11/12/2017. IN THE BACK GROUND OF THE AFORESAID FACTS IT IS SUBMITTED AS UNDER,' IT IS FIRSTLY SUBMITTED THAT THE REOPENING OF THE ASSESSMENT U/S.148 ITSELF WAS BAD IN LAW. IT IS APPARENT FROM THE REASONS RECORDED THAT T HE LD. AO REOPENED THE ASSESSMENT BY REPLYING ON THE UNCORROBORATED INFORMATION WHILE REOPENING THE ASSESSMENT WITHOUT APPLICATION OF MIND. IF YOUR HONOUR WILL KINDLY GO THROUGH THE MAJOR PORTION OF THE 1ST PAGE OF THE REASONS RECORDED IT IS APPARENT TH AT THE AO WAS OF THE OPINION THAT THE PREMIUM CHARGED BY THE CO. FOR ISSUE OF THE SHARES WAS UNJUSTIFIED. IT FURTHER APPEARS THAT THE LD. AO RELIED ON THE INFORMATION WITH REGARD TO THE STATEMENT OF SOME SURESH KUMAR PRANSUKHA BUT WHO RECORDED THE STATE MENT IS NOT SPELT OUT IN THE REASONS RECORDED. IN FACT SUCH STATEMENT WAS NOT ON RECORD OF THE AO NOR SUCH ALLEGED STATEMENT WAS LOOKED INTO BY THE AO. IT A/SO APPEARS THAT THE LD. AO SIMPLY DRAWN INFERENCE THAT THE INCOME OF THE GROUP WAS BROUGHT BACK IN THE GUISE OF SHARE CAPITAL WHICH AS PER THE AO WAS PREARRANGED TAILOR MAKE AND ACCOMMODATION ENTRY. THIS ALSO SHOWS THAT IT IS NOT THE CASE OF THE AO THAT THE AFORESAID AMOUNT WAS ESCAPED INCOME OF THE ASSESSEE. SECTION 147 CLEARLY POSTULATES THAT ASSE SSMENT CAN BE REOPENED ONLY IF THE INCOME OF THE ASSESSEE HAS ESCAPED ASSESSMENT AND FOR SUCH PURPOSE THE AO SHOULD HAVE FORM A REASONABLE BELIEF ON THE BASIS OF TANGIBLE MATERIAL. IT IS APP ARENT THAT NEITHER THERE WAS REASONABLE BELIEF NOR THERE WA S ANY WHISPER. THAT INCOME OF THE ASSESSEE HAS ESCAPED ASSESSMENT. IF THE INCOME OF THE GROUP (MEANING GHANSHYAM SARDA GROUP AS MENTIONED IN THE REASONS RECORDED) THEN THE ASSESSMENT OF THE ASSESSEE CON NOT BE REOPENED. WHEN THE ASSESSMENT 6 ITA NO. 2030/KOL/2018 A.Y 2010 - 11 M/S. ROZELLE SALES & SERVICES P.LTD. 6 REOPENED ITSE LF IS BAD IN LAW THEN IN THAT CASE THE PROCEEDINGS U/S.263 ARISING OUT OF A BAD ASSESSMENT IS ALSO BAD IN LAW. IN VIEW OF THE ABOVE THE PROCEEDINGS PLEASE BE DROPPED. IT FURTHER APPEARS FROM THE SHOW CAUSE NOTICE U/S.263 THAT IT IS ADMITTED FACT THAT THE AO CONDUCTED REQUISITE ENQUIRY AND AFTER MAKING PROPER ENQUIRIES ALSO CONCLUDED THAT THE CONTRIBUTION OF SHARE CAPITAL RECEIVED FROM M/S. URCH TRADERS PVT. LTD. WAS NOT EXPLAINED. THIS CONCLUSIVELY SUGGES T THAT THE LD. AO FULLY APPLIED HIS MIND TO ALL THE DETAILS AND DOCUMENTS FILED MADE PROPER ENQUIRY BY ISSUING SUMMONS AND TOOK A LOGICAL AND JUDICIAL DECISION. SIMPLY BECAUSE THE LD. PR. CIT WAS OF THE OPINION THAT THE ENQUIRY WAS NOT CONDUCTED IN THE MANNER CONTEMPLATED BY THE LD. PR. CIT ASSESSMENT CANNOT BE CANCELLED. IT APPEARS THAT YOUR HONOUR HAVE RELIED ON THE DECISION IN THE CASE OF SUBHLUXMY VANIJYA PVT. LTD., BUT IN THAT CASE NO ENQUIRY WAS MADE BY THE AO AT ALL, THE ASSESSEE WAS COMPLETED I N POST HASTE AND THE SAID COMPANY WAS CONSIDERED AS NOT A GENUINE COMPANY. THE FINDING WAS THAT NO ENQUIRY WAS MADE AT ALL. THE FACTS OF THE ASSESSEE'S CASE ARE ALTOGETHER DIFFERENT. THE ASSESSEE COMPANY IS DOING HUGE BUSINESS, THE TURNOVER OF WHICH IS MORE THAN 7 CRORES. THE EXISTENCE OF THE COMPANY AND ITS BUSINESS IS NOT DOUBTED OR DISPUTED. THE CAPITAL OF THE COMPANY IS IS 78 LAKHS WHEREAS THE SERVE AND SURPLUS IS OVER RS.6.44 CRORES. THIS SHOWS THE CREDITWORTHINESS OF THE ASSESSEE COMPANY. IT I S ALSO SUBMITTED THAT IN THE NOTICE U/S.263 THERE IS NO FINDING THAT THE SHAREHOLDER COMPANIES WERE NOT EXISTING ON THE ROLL OF THE DEPARTMENT OR THAT THEY ARE NOT REGULARLY FILING THEIR INCOME TAX RETURNS OR RETURN BEFORE THE ROC. IT APPEARS THAT YOUR HONOUR HAVE NOT LOOKED INTO THE ASSESSMENT RECORDS. ALL THE DETAILS AND ENQUIRIES MADE BY THE AO IN RESPECT OF SHARE CAPITAL ARE ON RECORD. THEREFORE, PROVISIONS OF SEC.263 CANNOT BE APPLIED ON MERE SUBJECTIVE SATISFACTION. IT MAY BE SUBMITTED THAT THER E IS NOTHING ON RECORD THAT THE COMPANIES FROM WHOM THE SHARE CAPITAL WAS RAISED ARE NOT GENUINE COMPANIES. IN VIEW OF THE ABOVE THE PROCEEDINGS U/S.263 PROPOSING REVISION OF THE ASSESSMENT MAY PLEASE BE DROPPED. 8. I HAVE CONSIDERED THE ABOVE SUBM ISSION OF THE LD. A R FILED ON BEHALF OF THE ASSESSEE. THE FIRST ARGUMENT OF THE LD. AR IS THAT WHEN THE ASSESSMENT REOPENED ITSELF IS BAD IN LAW THEN IN THAT CASE THE PROCEEDING U/S.2B3 ARISING OUT OF A BAD ASSESSMENT IS ALSO BAD IN LAW. THIS ARGUMENT OF THE LD. AR IS NOT LEGALLY C O RRECT. PROCEEDING U/S.263 IS STARTED AGAINST ANY 7 ITA NO. 2030/KOL/2018 A.Y 2010 - 11 M/S. ROZELLE SALES & SERVICES P.LTD. 7 ORDER PASSED UNDER THE INCOME TAX ACT., 1961, WHICH EXISTS ON THE DATE, WHEN PROCEEDING U/S.263 IS STARTED AGAINST THAT ORDER IN CASE THAT ORDER IS FOUND TO BE ERRONEOUS AN D PREJUDICIAL TO THE INTEREST OF REVENUE. EXAMINATION OF THE VALIDITY OF THE SAID ORDER DOES NOT COME UNDER THE PURVIEW OF SECTION 263. REOPENING OF THE PROCEEDING Y/S.147 AND PASSING OF THE SUBSEQUENT ORDER U/S.147/143(3) MAY BE SUBJECT MATTER OF APPEAL . TILL PASSING OF THIS ORDER, NO APPELLATE ORDER HAS BEEN PASSED AGAINST THE ASSESSMENT ORDER UNDER CONSIDERATION IN THIS ORDER, HOLDING REOPENING U/S.147 AND PASSING OF SUBSEQUENT ORDER U/S.147/143(3) AS BAD IN LAW. THEREFORE, THE ARGUMENT TAKEN BY THE LD. AR ON THE VALIDITY OF PROCEEDING U/S.263 AGAINST THE ASSESSMENT ORDER U/S.147/143(3) DATED 30/11/2017 TERMING IT AS BAD IN LAW, IS REJECTED AND HOLD THAT THE SAID ASSESSMENT ORDER BEING A VALID ORDER AS ON THE DATE, THE SAME CAN BE REVISED U/S. 263 . THE SECOND OBJECTION OF THE LD. AR THAT I HAVE DECIDED TO TAKE REVISIONARY ACTION ONLY ON THE BASIS OF MY SUBJECTIVE SATISFACTION IS ALSO NOT CORRECT. HIS CONTENTION THAT THE AO HAD MADE ALL THE ENQUIRIES TO ASCERTAIN GENUINENESS OF SHARE CAPITAL AND ALL THE DETAILS AND ENQUIRIES MADE BY THE AO IN RESPECT OF SHARE CAPITAL ARE ON RECORD IS ALSO N OT CORRECT. HE HAS ALSO REFERRED TO SUMMONS ISSUED BY THE AO FOR EXAMINING SHARE HOLDERS BUT THIS FACT IS ALSO NOT CORRECT. I HAVE ALREADY DISCUSSED IN DETAIL FROM PARA 2 TO 5 ABOUT PROPER AND COMPREHENSIVE ENQUIRIES NOT MADE BY THE AO TO ASCERTAIN THE G ENUINENESS OF SHARE CAPITAL BY VERIFYING ALL THE THREE CONDITIONS OF SECTION 68. AS PER EXPLANATIONS 2, IF, IN THE OPINION OF THE PRINCIPAL COMMISSIONER, AN ORDER IS PASSED WITHOUT MAKING ENQUIRIES OR VERIFICATION, WHICH SHOULD HAVE BEEN MADE, SUCH ORDER SHALL BE DEEMED TO BE ERRONEOUS IN SO FAR AS IT IS PREJUDICIAL TO THE INTEREST OF REVENUE.. MY SATISFACTION ON PROPER ENQUIRY NOT MADE BY THE AO IS NOT SUBJECTIVE BUT BASED ON THOSE ENQUIRIES THAT SHOULD HAVE BEEN MADE BY THE AO BUT HAS NOT BEEN MADE AS DISCUSSED IN PARA 2 OF THIS ORDER. THE ISSUE, WHETHER INADEQUATE INQUIRY CONDUCTED BY THE ASSESSING OFFICER EMPOWERS THE COMMISSIONER TO REVISE THE ASSESSMENT ORDER, HAS BEEN QUITE EXHAUSTIVELY DEALT WITH IN THE ORDER OF ITAT, KOLKATA IN CASE OF M/S. SUB HLOKSHMI VANIJYA PVT. LTD.(SUPRA), HOLDING THAT IF THE AO SIMPLY GATHERS DOCUMENTS AND KEEP THEM ON RECORD, THEN SUCH NOMINAL ENQUIRY FALLS WITHIN THE OVERALL CATEGORY OF 'NO ENQUIRY'. IT IS ALSO WRONG ON PART OF THE LD. AR TO SAY THAT IN CASE OF M/S. SU BHLAKSHMI VANIJYA PVT. LTD., NO ENQUIRY WAS MADE BY THE AO AT ALL. IN THE CASE OF M/S. SUBHLAKSHMI VANIJYA PVT. LTD. ALSO, THE AA ISSUED NOTICES U/S.133(6) BUT HE FAILED TO COMPREHEND THE MANNER OR LOGIC BEHIND ISSUING SHARES AT SUCH A HIGH PREMIUM, NOR TO EXAMINE ANY OF THE DIRECTORS OF THE COMPANIES WHICH WERE SUBSCRIBERS TO SHARE CAPITAL AND HE SIMPLY ACCEPTED THE REPLIES GIVEN BY ALL THE 8 ITA NO. 2030/KOL/2018 A.Y 2010 - 11 M/S. ROZELLE SALES & SERVICES P.LTD. 8 SHAREHOLDERS CONFIRMING MAKING INVESTMENT IN SHARE CAPITAL OF THE ASSESSEE COMPANY AND SHOWING PAYMENT BY CHEQUE . FACTS OF THIS CASE AND FACTS OF M/S. SUBHLAKSHMI VANIJYA PVT. LTD. ARE ALMOST SIMILAR. IN CASE OF M/S. SUBHLAKSHMI VANIJYA PVT. LTD., R A HIGH PREMIUM OF RS.190/ - AGAINST THE FACE VALUE OF RS.L0/ - WAS SHOWN DESPITE THERE BEING NO SIGNIFICANT BUSINESS OF M/S. SUBHLAKSHMI VANIJYA PVT. LTD. AT THAT TIME, WHEN SUCH HIGH VALUE OF PREMIUM HAS BEEN SHOWN AS CHARGED BY THE ASSESSEE COMPANY. IN THE INSTANT CASE ALSO, A HIGH PREMIUM OF RS.490/ - , SUBSTANTIALLY HIGHER THAN WHAT WAS IN THE CASE OF M/S. SUBHLAKSHM I VANIJYA PVT. LTD. HAS BEEN SHOWN AS CHARGED WITH NO JUSTIFICATION AS THE ASSESSEE COMPANY IS NOT IN ANY PROFITABLE BUSINESS HAVING ANY SIGNIFICANT PRESENCE IN THE MARKET THAT CAN COMMAND A HIGH PREMIUM OF RS.490/ - PER SHARE WITH A FACE VALUE OF RS.L0/ - . THEREFORE, THE DECISION OF JURISDICTIONAL I TAT, KOLKATA IN CASE OF M/S. SUBHLAKSHMI VANIJYA PVT. LTD. (SUPRA) WILL APPLY IN CASE OF THIS ASSESSEE ALSO, AND THEREFORE, AS HELD IN THE ABOVE CITED CASE, THE ORDER PASSED BY THE AO IN THIS CASE ALSO, IS E RRONEOUS AND PREJUDICIAL TO THE INTEREST OF REVENUE BECAUSE FOR PASSING OF THIS ASSESSMENT ORDER, THE AO HAD ONLY RELIED UPON THE REPLY SUBMITTED IN RESPONSE TO NOTICE U/S.133(6) AND DID NOT VERIFY THE CORRECTNESS OF THE REPLY BY MAKING FIELD ENQUIRIES AND HENCE, HIS ACCEPTANCE OF GENUINENESS OF TRANSACTION OF SUBSCRIPTION OF SHARES REMAINED UNDER DARK CLOUD DUE TO INADEQUATE ENQUIRY MADE BY HIM AND SUCH INADEQUATE ENQUIRY MADE BY HIM IS AS GOOD AS NO ENQUIRY. IN THIS REGARD, THE HON'BLE ITAT, KOLKATA IN THE ABOVE CITED CASE HAS VERY CATEGORICALLY HELD THAT THE HIGHLY INADEQUATE ENQUIRY CONDUCTED BY THE AO RESULTING IN DRAWING INCORRECT ASSUMPTION OF FACTS, MAKES THE ORDERS ERRONEOUS AND PREJUDICIAL TO THE INTEREST OF REVENUE. AS REGARDS THE ARGUMEN T OF LD. AR RAISED ON THE BASIS OF REASONS RECORDED BY THE AO FOR REOPENING OF THE ASSESSMENT PROCEEDING U/S.147 THAT IF UNACCOUNTED INCOME HAS BEEN FOUND TO BE EARNED BY A GROUP AS MENTIONED IN THE REASONS RECORDED TO BE GHANSHYAM SARDA GROUP, ON THE B ASIS OF FINDING OF SEARCH, THEN ASSESSMENT PROCEEDING OF THE ASSESSEE CANNOT BE REOPENED BECAUSE IN THE OPINION OF THE L.D. AR SUCH INCOME CANNOT BE TAXED IN THE HAND OF THE ASSESSEE. SUCH ARGUMENT OF THE LD. AR ALSO DOES NOT HOLD GOOD BECAUSE THE PRESENT CASE IS WITH RESPECT TO EXAMINATION OF GENUINENESS OF SHARE CAPITAL OF A PRIVATE LIMITED COMPANY. IN CASE OF PERM CASTINGS (P) LTD. - VS - C I T (2017) 88 TAXMANN.COM 189 (A LL AHABAD), IT HAS BEEN HELD THAT IN CASE OF PRIVATE LIMITED COMPANY, SUBSCRIPTION TO S HARE CAPITAL IS MADE THROUGH PRIVATE INVITATION AND NOT THROUGH PUBLIC DOCUMENT. THEREFORE, IT WAS THE ASSESSEE COMPANY ITSELF THAT OUGHT TO HAVE KNOWN THE PERSON/S IT INVITED TO SUBSCRIBE TO ITS SHARE CAPITAL AND HENCE, THE ASSESSEE CANNOT HIDE BEHIND THE SHELL OF A 9 ITA NO. 2030/KOL/2018 A.Y 2010 - 11 M/S. ROZELLE SALES & SERVICES P.LTD. 9 CORPORATE ENTITY TO FEIGN IGNORANCE OF THE REAL PERSON WHO MAY HAVE SUBSCRIBED TO ITS SHARE CAPITAL. THIS IS A SPECIAL FACT KNOWN ONLY TO THE ASSESSEE WHO ALONE MAY HAVE BEEN AWARE OF THE REAL IDENTITY OF SUCH PERSONS. UPON FAILURE TO DISCLOSE AND ESTABLISH THE IDENTITY OF SUCH A PERSON, AN ADVERSE INFERENCE AND CONSEQUENTIAL ADDITION HAD TO BE MADE IN THE HANDS OF THE ASSESSEE COMPANY ITSELF UNDER SECTION 68 OF THE ACT BY DISBELIEVING THE CASH CREDIT ENTRIES FOUND RECORDED IN THE BOOKS OF THE ASSESSEE BEING A PRIVATE L IMITED COMPANY. THEREFORE, IN VIEW OF THE ABOVE DECISION OF THE ALLAHABAD HIGH COURT, IN CASE OF A PRIVATE LIMITED COMPANY, IF GENUINENESS OF THE SHARE CAPITAL OF A PRIVATE LIMITED COMPANY I S NOT EXPLAINED, NECESSARY ADDITION UN DER SECTION 68 OF THE ACT IS TO BE MADE IN THE INCOME OF THAT PRIVATE LIMITED COMPANY. THEREFORE, I REJECT THIS ARGUMENT OF LD. AR ALSO THAT THE REOPENING OF ASSESSMENT IS BAD IN LAW ONLY BECAUSE OF THE REASON THAT IF SHARE CAPITAL OF AN ASSESSEE COMPANY IS FOUND UNEXPLAINED, IT CANNOT BE SAID THAT INCOME OF THE ASSESSEE HAS ESCAPED ASSESSMENT. 9. AFTER NONE OF THE ARGUMENTS RAISED BY THE LD. AR AGAINST THE REVISION U/S.263 OF THE ACT OF THE ASSESSMENT ORDER PASSED U/S.143(3) DATED 30.11.2017 FOR A.Y.2 011 - 12 FOUND TO BE SUSTAINABLE UNDER LAW, ALL THESE ARGUMENTS ARE REJECTED AND I HOLD THAT THE ASSESSMENT ORDER PASSED U/S.143(3) DATED 30.11.2017 FOR A.Y.2011 - 12 IS ERRONEOUS IN SO FAR AS IT IS PREJUDICIAL TO THE INTEREST OF REVENUE TO THE EXTENT OF NOT EXAMINING THE GENUINENESS OF SHARE CAPITAL OF THE ASSESSEE COMPANY SUBSCRIBED IN THE NAME OF 16 COMPANIES AS MENTIONED IN THE TABLE ON PAGE 0.3 OF THIS ORDER EXCEPT OF M/S. URCH TRADERS PVT. LTD., WHICH IS ALREADY HELD AS UNEXPLAINED BY THE AO AND ADDI TION OF RS. 55 LAKH HAS BEEN MADE IN ASSESSMENT ORDER DATED 30.11.2017 HOLDING THIS AMOUNT AS UNEXPLAINED CASH CREDIT IN THE HAND OF THE ASSESSEE COMPANY U/S.68. THEREFORE, THE ABOVE MENTIONED ASSESSMENT ORDER DATED 30/11/2017 IS SET ASIDE AND RESTORED TO THE FILE OF THE A O TO THE EXTENT OF EXAMINING THE GENUINENESS OF SHARE CAPITAL OF THE ASSESSEE COMPANY SUBSCRIBED BY 16 (SIXTEEN) COMPANIES OTHER THAN M/S. URCH TRADERS PVT. LTD. WHILE ASCERTAINING THE GENUINENESS OF THE SHARE CAPITAL OF THE ASSESSEE CO MPANY, FOLLOWING ENQUIRY/EXAMINATION HAS TO BE MADE BY THE A O : (I) PHYSICAL EXISTENCE OF ALL THE SHARE - HOLDER COMPANIES IS TO BE ENQUIRED INTO BY MAKING FIELD ENQUIRY AT THE ADDRESS REGISTERED WITH R OC . (II) IF ON THE ABOVE MENTIONED ADDRESS, ANY SHAR EHOLDER COMPANY IS NOT FOUND, THE ASSESSEE COMPANY SHOULD BE GIVEN AN OPPORTUNITY TO TELL ABOUT 10 ITA NO. 2030/KOL/2018 A.Y 2010 - 11 M/S. ROZELLE SALES & SERVICES P.LTD. 10 THE LATEST ADDRESS OF SUCH SHAREHOLDER COMPANY. IF ON LATEST ADDRESS ALSO, AS TOLD BY THE ASSESSEE COMPANY, THE SHAREHOLDER COMPANY IS NOT FOUND OR THE ASSESS EE COMPANY FAILS TO GIVE LATEST ADDRESS, THE ASSESSEE COMPANY SHOULD BE ASKED TO ESTABLISH THE IDENTITY OF SUCH SHAREHOLDER COMPANIES THAT ARE NOT FOUND EXISTING ON THEIR ADDRESS. (III) FOR THOSE SHAREHOLDER COMPANIES THAT ARE FOUND EXISTING AT THEIR ADDRESS, ENQUIRIES SHOULD BE MADE AS TO WHO ARE THE PERSONS WHO ARE LOOKING AFTER THE BUSINESS AND DAY TO DAY AFFAIRS, SUCH AS ADMINISTRATIVE, ACCOUNTS, AUDITS ETC. OF THESE COMPANIES. THESE PERSONS ALONG WITH DIRECTORS OF THESE COMPANIES SHOULD BE EXA MINED ON OATH U/S.131 OF THE ACT. DURING EXAMINATION OF THESE PERSONS, BOOKS OF ACCOUNT OF THESE COMPANIES SHOULD ALSO BE CALLED FOR AND EXAMINED WHILE TAKING STATEMENTS OF THESE PERSONS. THIS EXAMINATION SHOULD BE DONE IN COMPREHENSIVE MANNER IN ORDER T O ASCERTAIN WHETHER THESE COMPANIES ARE RUNNING ANY GENUINE BUSINESS TO EARN INCOME TO GENERATE FUND OUT OF WHICH, INVESTMENT IN SHARE CAPITAL FUND OF THE ASSESSEE COMPANY HAS BEEN MADE OR THEY HAVE ONLY FACILITATED IN CIRCULATION OF CAPITAL FROM ONE CO MPANY TO ANOTHER WITHOUT DOING ANY WORTHWHILE BUSINESS ACTIVITY AND THEY HAVE COME TOGETHER TO FACILITATE IN ISSUING OF SHARES AT SUCH A HUGE PREMIUM OF RS.490/ - PER SHARES TO THE ASSESSEE COMPANY 2S OBSERVED BY THE ITAT, KOLKATA IN CASE OF M/S. SUBHLAKS HMI VANIJYA PVT. LTD.(SUPRA). IN CASE, THESE SHAREHOLDER COMPANIES ARE FOUND TO BE HAVING NO WORTHWHILE BUSINESS AND FUNDS FOR INVESTMENT IN SHARE CAPITAL OF THE ASSESSEE CAME ONLY THROUGH CIRCULATION OF FUNDS, THE DIRECTORS OF THESE COMPANIES SHOULD BE QUESTIONED ON RATIONALE BEHIND DOING SUCH CIRCULATION OF FUNDS WITHOUT ANY GAIN TO THEIR COMPANIES AND APPROPRIATE CONCLUSION ON CREDITWORTHINESS OF THESE SHAREHOLDER COMPANIES SHOULD BE DRAWN AFTER CONFRONTING OF ALL THE FACTS GATHERED BY THE A O ON EXAMINATION OF ALL THE PERSONS CONNECTED WITH SUCH SHARE - HOLDER COMPANIES INCLUDING THEIR DIRECTORS. (IV) FOR ASCERTAINING THE GENUINENESS OF TRANSACTION INVOLVING INVESTMENT IN SHARE CAPITAL OF THE ASSESSEE COMPANY, THE A O SHOULD FIRST ENQUIRE FRO M THE ASSESSEE COMPANY ABOUT THE BASIS OF FIXING A PREMIUM OF RS.490/ - PER SHARE AND JUSTIFICATION FOR THE SAME. THEN, DIRECTORS OF THE SHAREHOLDER COMPANIES SHOULD BE EXAMINED TO FIND OUT FROM THEM ABOUT THE DUE DILIGENCE MADE BY THEM ON MAKING INVEST MENT IN THE ASSESSEE COMPANY ON SUCH A HUGE PREMIUM AND TO EXPLAIN AS TO WHAT WERE FACTORS THAT THEY FOUND FAVOURABLE TO ASSESSEE COMPANY, WHICH CONVINCED THEM FOR MAKING INVESTMENT IN ASSESSEE COMPANY AT SUCH HUGE PREMIUM. THEN, IT SHOULD BE 11 ITA NO. 2030/KOL/2018 A.Y 2010 - 11 M/S. ROZELLE SALES & SERVICES P.LTD. 11 ENQUIRED WHETHER ANY BOARD RESOLUTION WAS PASSED BY THE SHAREHOLDER COMPANIES FOR MAKING INVESTMENT IN THE ASSESSEE COMPANY AND THE SAME WAS RECORDED IN MINUTES BOOK OF THESE SHAREHOLDER COMPANIES. (V) AFTER ASCERTAINING ALL THE ABOVE FACTS AND CONFRONTING TO THE ASSESSEE COMPANY, APPROPRIATE DECISION IS TO BE TAKEN BY THE AO ABOUT THE GENUINENESS OF TRANSACTIONS THROUGH WHICH INVESTMENT IN SHARE CAPITAL OF THE ASSESSEE COMPANY WAS MADE BY THESE SHAREHOLDER COMPANIES. AS THE ONUS FOR ESTABLISHING THE GENUINENESS OF SHARE CAPITAL IS ON THE ASSESSEE COMPANY, THE AO SHOULD FIRST ASK THE ASSESSEE COMPANY TO PRODUCE ALL THE DETAILS, BOOKS OF ACCOUNT OF SHAREHOLDER COMPANIES AND FOR PRODUCING THE DIRECTORS AND OTHER CONNECT ED PERSONS OF SHAREHOLDER COMPANIES FOR EXAMINATION AND IN CASE OF ITS REFUSAL/INABILITY TO DO SO OR ASKING THE A O TO SUMMON THEM DIRECTLY AND IN CASE THOSE SHAREHOLDER COMPANIES ARE NOT FOUND ON GIVEN ADDRESS OR NOT COOPERATING WITH THE DEPARTMENT IN CO MPLYING WITH SUMMON OR NOR PROVIDING THE REQUIRED DETAIL/EXPLANATION AS DIRECTED ABOVE TO BE EXAMINED/ENQUIRED INTO, ADVERSE INFERENCE KEEPING IN VIEW THE DECISION OF I TAT, KOLKATA IN CASE OF M/S. SUBHLAKSHMI VANIJYA PVT. LTD. (SUPRA) AND DECISION OF AL LAHABAD HIGH COURT IN CASE OF PREM CASTINGS (P) LTD. (SUPRA) MAY BE DRAWN BY THE AO AGAINST THE INVESTMENT IN SHARE CAPITAL OF THE ASSESSEE COMPANY SHOWN BY THESE SHAREHOLDER COMPANIES AND NECESSARY ADDITION U/S.68 SHOULD BE MADE ON THE BASIS OF FINDINGS OF THE AO ABOUT IDENTITY, CREDIT WORTHINESS OF SHAREHOLDERS AND GENUINENESS OF TRANSACTIONS KEEPING IN VIEW THE PROVISIONS OF SECTION 68. BEFORE PASSING REVISED ORDER AS PER MY DIRECTIONS AS DISCUSSED IN THIS PARA, THE ASSESSEE SHOULD BE CONFRONTED WITH .ALL THE FINDINGS WHICH ARE ADVERSE TO IT, CALLING FOR ITS EXPLANATION ON THESE FINDINGS AND THEN DECISION FOR ADDITION U/S.68 SHOULD BE TAKEN AFTER CONSIDERING THE EXPLANATION OF THE ASSESSEE, IF ANY FILED. 8. IN VIEW OF MY ABOVE DECISION, THE AS SESSMENT ORDER PASSED U/S. 147/ 143 (3) DATED 30.11.2017 FOR A.Y.2010 - 11 IS SET ASIDE TO THE EXTENT AND FOR THE PURPOSE OF FURTHER EXAMINATION AND PASSING OF A REVISED ASSESSMENT ORDER AS DISCUSSED IN PREVIOUS PARA. THE ADDITION OF RS.55 LAKH MADE IN ORI GINAL ASSESSMENT ORDER SHALL REMAIN INTACT. 12 ITA NO. 2030/KOL/2018 A.Y 2010 - 11 M/S. ROZELLE SALES & SERVICES P.LTD. 12 7. LEARNED C OUNSEL S FIRST AND FORMER PLEA RAISED DURING THE COURSE OF HEARING IS THAT THE P CIT HAS ERRED IN LAW AND ON FACTS IN HOLDING THAT ASSESSEE COULD NOT HAVE CHALLENGED THE CORRECTNESS OF RE - OPENI NG / RE - ASSESSMENT IN HIS REVISION PROCEEDINGS U/S. 263 OF THE ACT. HIS CASE IS THAT IF THE RE - ASSESSMENT ITSELF IS PROVED TO BE NON EST IN THE EYES OF LAW, THE SAME COULD NOT BE REVISED U/S. 263 OF THE ACT AS WELL . LEARNED C OUNSEL QUOTED PCITS DETAILED DISCUSSION TO THIS EFFECT IN PARA 7 AS EXTRACTED HEREINABOVE. CASE LAW SRI BALAJI FORGINGS V /S. PCIT ITA NO. 3216/DEL/2017, M/S. SUPER SONIC TECHNOLOGIES LTD ITA 2269/DEL DATED 10 - 12 - 2018 , M/S. SP J HOTEL P.LTD IN ITA NO. 2857 /D EL/17, SAI INFRASTRUCTURE ITA 3216/K OL /17, M/S. CLASSIC FLO UR & FOOD PROCESSING PVT. LTD ITA 764,765/K/14 DATED 5 - 4 - 2017 AND M/S. DD DEPOSITS AND FINANCE P.LTD V/S. CIT IN ITA NO. 1214/KOL/2013 DATED 11/5/2018 QUOTED IN SUPPORT OF ASSESSEE COULD VERY MUCH CHALLENGE THE VALIDITY OF THE RE - ASSESSMENT ITSELF DURING THE COURSE OF REVISION PROCEEDINGS U/S. 263 OF THE ACT. 8 . LEARNED CIT - DRS CASE ON THE OTHER HAND IS THAT THE TAXPAYER FOREGOING LEGAL PLEA DOES NOT DESERVE TO BE ACCEPTED SINCE THE IMPUGNED RE - A SSESSMENT AS WELL AS ALL CONSEQUENCES FOLLOWING THEREFROM HAVE ATTAINED FINALITY. THE ASSESSING OFFICER HAD FURTHER INITIATED SEC. 271 (1) ( C) PENALTY PROCEEDINGS TO THIS EFFECT FORMING PART OF THE RECORD. 9. WE HAVE GIVEN OUR THOUGHTFUL CONSIDERATION TO RIVAL CONTENTION S QUA THE INSTANT FORMER ISSUE AS TO WHETHER THE ASSESSEE COULD CHALLENGE VALIDITY OF RE - ASSESSMENT ITSELF IN VALIDITY SECTION 263 REVISION PROCEEDINGS. WE FIND THAT THIS FORMER ISSUE IS NO MORE RES INTEGRA. TH IS TRIBUNALS DECISION IN CLASSIC FLOUR & FOOD PROCESSING P.LTD (SUPRA) REJECTED THE R EVENUES VERY ARGUMENT AS UNDER: - '7.AS FAR AS THE ADDITIONAL GROUNDS OF APPEAL RAISED BY THE ASSESSEE ARE CONCERNED, IT CAN BE SEEN FROM THE ADDITIONAL GROUNDS THAT THE ASSESSEE WANTS TO CONTEND THAT THE VERY INITIATION OF PROCEEDINGS U/S 147 OF THE ACT 13 ITA NO. 2030/KOL/2018 A.Y 2010 - 11 M/S. ROZELLE SALES & SERVICES P.LTD. 13 WAS BAD IN LAW AND THEREFORE PROCEEDINGS U/S 263 OF THE ACT CANNOT BE INITIATED ON AN ORDER WHICH IS INVALID IN LAW. IT IS THE FURTHER CONTENTION OF THE ASSESSEE THAT IN THE REASONS RECORDED FOR REOPENING OF THE ASSESSMENTS U/S 147 OF THE ACT, THE AO HAS MENTIONED THAT THERE WAS UNEXPLAINED INVESTMENT IN CONSTRUCTION OF HOTEL AND RESORTS AT MANDARMONI, PURBA MIDNAPORE AND SUCH UNEXPLAINED INVESTMENT IN THE CONSTRUCTION WHICH OUGHT TO HAVE BEEN BROUGHT TO TAX AS INCOME OF THE ASSESSEE HAS ESCAPED THE ASSESSMENT. IT IS THE CASE OF THE ASSESSEE THAT IN THE ASSESSMENT ORDER PASSED U/S 147 OF THE ACT, THE AO DID NOT MAKE ANY ADDITION ON ACCOUNT OF UNEXPLAINED INVESTMENT IN CONSTRUCTION. IT IS THE PLEA OF THE ASSESSEE THAT WHEN NO ADDITION IS MADE ON THE GROUNDS ON WHICH RE - ASSESSMENT PROCEEDINGS ARE INITIATED THEN NO OTHER ADDITION CAN BE MADE IN SUCH REASSESSMENT PROCEEDINGS. 8. THE FIRST ASPECT WHICH NEEDS TO BE EXAM INED IS AS TO WHETHER THE ASSESSEE IS ENTITLED TO CHALLENGE THE VALIDITY OF INITIATION OF PROCEEDINGS U/S 147 OF THE ACT IN THE PRESENT APPEALS IN WHICH HE HAS CHALLENGED THE VALIDITY OF ORDER PASSED U/S 263 OF THE ACT. THE ID. COUNSEL FOR THE ASSESSEE SUBMITTED BEFORE US THAT IT IS OPEN TO AN ASSESSEE IN AN APPEAL AGAINST THE ORDER U/.S 263 OF THE ACT WHICH SEEKS TO REVISE AN ORDER PASSED U/S 147 OF THE ACT, TO CHALLENGE THE VALIDITY OF THE ORDER PASSED U/S.147 OF THE ACT AS WELL AS INITIATION OF PRO CEEDINGS U/.S 147 OF THE ACT. IN THIS REGARD THE ID. COUNSEL FOR THE ASSESSEE PLACED BEFORE. US TWO DECISIONS ONE RENDERED BY LUCKNOW BENCH OF ITAT IN THE CASE OF INDER KUMAR BACHANI (HUF) VS IT A 99 ITD 621 (LUCK) AND ITAT MUMBAI ' G ' BENCH IN THE CASE OF M/S. WESTLIFE DEVELOPMENT LTD. VS PRINCIPAL CIT IN ITA NO.688/MUMI2016. IN BOTH THE DECISIONS A VIEW HAS BEEN TAKEN BY THE TRIBUNAL THAT WHEN AN ASSESSMENT ORDER PASSED U/S 147 OF THE ACT WAS ILLEGAL THE CIT CANNOT INVOKE THE JURISDICTION U/S 263 OF T HE ACT AGAINST SUCH VOID OR NON - EST ORDER. IN THE SECOND DECISION CITED THE HON'BLE MUMBAI BENCH OF THE TRIBUNAL HAS SPECIFICALLY FRAMED THE FOLLOWING QUESTIONS : - ' 1. WHETHER THE ASSESSEE CAN CHALLENGE THE VALIDITY OF AN ASSESSMENT ORDER DURING THE AP PELLATE PROCEEDINGS PERTAINING TO EXAMINATION OF VALIDITY OF ORDER PASSED U/S 263? 2. WHETHER THE IMPUGNED ASSESSMENT ORDER PASSED U/S 143(3) DATED 24 - 10 - 2013 WAS VALID IN THE EYES OF LAW OR A NULLITY AS HAS BEEN CLAIMED BY THE ASSESSEE? 14 ITA NO. 2030/KOL/2018 A.Y 2010 - 11 M/S. ROZELLE SALES & SERVICES P.LTD. 14 3. IF THE IMPUGNED ASSESSMENT ORDER PASSED U/S 143(3) WAS ILLEGAL OR NULLITY IN THE EYES OF LAW, THEN, WHETHER THE CIT HAD A VALID JURISDICTION TO PASS THE IMPUGNED ORDER U/S 263 TO REVISE THE NON EST ASSESSMENT ORDER?' 9. ON QUESTION NO. I AND 3 WHICH IS RELEVANT TO THE PRESENT CASE THE HON'BLE MUMBAI BENCH OF THE TRIBUNAL HAS TAKEN THE VIEW THAT WHEN THE ORIGINAL ASSESSMENT PROCEEDINGS ARE NULL AND VOID IN THE EYES OF LAW FOR WANT OF PROPER ASSUMPTION OF JURISDICTION THEN SUCH VALIDITY CAN BE CHALL ENGED EVEN IN COLLATERAL PROCEEDINGS. THE MUMBAI BENCH TOOK THE VIEW THAT THE PROCEEDINGS U/S 147 OF THE ACT ARE PRIMARY PROCEEDINGS AND PROCEEDINGS U/S 263 OF THE ACT ARE COLLATERAL PROCEEDINGS AND IN SUCH COLLATERAL PROCEEDINGS, THE VALIDITY OF INITIA TION OF THE ORIGINAL PROCEEDINGS U/S 147 OF THE ACT CAN BE CHALLENGED. THE MUMBAI BENCH OF THE TRIBUNAL IN THIS REGARD HAS PLACED RELIANCE ON SEVERAL DECISIONS, THE PRINCIPAL DECISION BEING THAT OF THE HON'BLE SUPREME COURT IN THE CASE OF KIRAN SINGH & O RS. V. CHAMAN PASWAN & ORS. [1955] SCR 1 17 WHEREIN THE HON'BLE SUPREME COURT OBSERVED AS FOLLOWS : ' IT IS A FUNDAMENTAL PRINCIPLE WELL - ESTABLISHED THAT A DECREE PASSED BY A COURT WITHOUT JURISDICTION IS A NULLITY, AND THAT ITS INVALIDITY COULD BE SET UP WHENEVER AND WHEREVER IF IS SOUGHT TO BE ENFORCED OR RELIED UPON, EVEN AT THE STAGE' OF EXECUTION AND EVEN IN COLLATERAL PROCEEDINGS. A DEFECT OF JURISDICTION, WHETHER IT IS PECU NIARY OR TERRITORIAL, OR WHETHER IT IS IN RESPECT OF THE SUBJECT - MATTER OF THE ACTION, STRIKES AT THE VERY AUTHORITY OF THE COURT TO PASS ANY DECREE AND SUCH A DEFECT CANNOT BE CURED EVEN BY CONSENT OF PARTIES. 10. THE ITAT MUMBAI BENCH MADE A REFER ENCE TO ANOTHER DECISION OF THE HON'BLE SUPREME COURT IN THE CASE OF SUSHIL KUMAR MEHTA VS GOBIND RAM BOHRA, (1990) 1 SCC 193 AND THE DECISIONS IN THE CASE OF INDIAN BANK VS MANILAL GOVINDJI KHONA (201:;) 3 SCC 712. THE IT A T MUMBAI BENCH ALSO HELD THA T IF ORDER OF ASSESSMENT PASSED U/S 147 OF THE ACT WAS II1EGAL AND NULLITY IN THE EYES OF LAW THEN THAT ORDER CANNOT BE REVISED BY INVOKING POWERS U/S 263 OF THE ACT BY CIT. THE MUMBAI BENCH HAS IN THIS REGARD PLACED RELIANCE ON THE DECISION OF HORI' BL E DELHI BENCH OF THE TRIBUNAL IN THE CASE OF KRISHNA KUMAR SARAF VS CIT IN ITA N0.4562/DEIL2007 ORDER DATED 24.09.2015 WHEREIN IT WAS HELD AS FOLLOWS : - .. 17. THERE IS NO QUARREL WITH THE PROPOSITION ADVANCED BY ID. DR THAT THE PROCEEDINGS U/S 263 A RE FOR THE BENEFIT OF REVENUE AND NOT FOR ASSESSEE. 15 ITA NO. 2030/KOL/2018 A.Y 2010 - 11 M/S. ROZELLE SALES & SERVICES P.LTD. 15 18. HOWEVER, U/S 263 THE ID. COMMISSIONER CANNOT REVISE A NON EST ORDER IN THE 'YE OF LAW. SINCE THE ASSESSMENT ORDER WAS PASSED IN PURSUANCE TO THE NOTICE U/S 143(2), WHICH WAS BEYOND TIME, THEREFORE, THE ASSESSMENT ORDER PASSED IN PURSUANCE TO THE BARRED NOTICE HAD NO LEGS TO STAND AS THE SAME WAS NON EST IN THE EYES OF LAW. ALL PROCEEDINGS SUBSEQUENT TO THE SAID NOTICE ARE OF NO CONSEQUENCE. FURTHER, THE DECISION OF HON'BLE MADRAS HIGH COURT IN THE C ASE OF CIT VS. GITSONS ENGINEERING CO. 370 ITR 87 (MAD) CLEARLY HOLDS THAT THE OBJECTION IN RELATION TO NON SERVICE OF NOTICE COULD BE RAISED FOR THE FIRST TIME BEFORE THE TRIBUNAL AS THE SAME WAS LEGAL, WHICH WENT TO THE ROOT OF THE MATTER. 19. WHILE EXERCISING POWERS U/S 263 ID. COMMISSIONER CANNOT REVISE AN ASSESSMENT ORDER WHICH IS NON EST IN THE EYE OF LAW BECAUSE IT WOULD PREJUDICE THE RIGHT OF ASSESSEE WHICH HAS ACCRUED IN FAVOUR OF ASSESSEE ON ACCOUNT OF IFS INCOME BEING DETERMINED. IF ID. COM MISSIONER REVISES SUCH AN ASSESSMENT ORDER, THEN IT WOULD IMPLY EXTENDING/ GRANTING FRESH LIMITATION FOR PASSING FRESH ASSESSMENT ORDER. IT IS SETTLED LAW THAT BY THE ACTION O{ THE AUTHORITIES THE LIMITATION CANNOT BE EXTENDED. BECAUSE THE PROVISIONS OF LI MITATION ARE PROVIDED ILL THE SAME 20. IN VIEW OF ABOVE DISCUSSION GROUND NO.3 IS ALLOWED AND REVISION ORDER PASSED U/S.263 IS QUASHED. 11. THE LEARNED DR RELIED ON THE ORDER OF THE CIT(A). WE HAVE CONSIDERED THE RIVAL SUBMISSIONS. WE ARE OF THE VIEW THAT THE VALIDITY OF THE ORDER U/S 147 OF THE ACT DEPENDS UPON THE AO ASSUMING JURISDICTION TO MAKE AN ORDER OF ASSESSMENT U/S 147 OF THE ACT AFTER FULFILLING THE CONDITIONS LAID DOWN IN THE SAID SECTION NAMELY REASON TO BELIEVE THE INCOME CHARGEABLE TO TAX FOR THAT ASSESSMENT YEAR HAS ESCAPED ASSESSMENT. IF THIS CONDITION IS NOT SATISFIED THEN IT CANNOT BE SAID THE AO HAS VALIDLY ASSUMED JURI SDICTION U/S 147 OF THE ACT. IF THE VALIDITY OF PROCEEDINGS U/S 147 OF THE ACT HAS NOT BEEN CHALLENGED BY THE ASSESSEE BY FILING APPEAL AGAINST THE ORDER U/S.147 OF THE ACT, CAN IT BE CHALLENGED IN THE APPEAL AGAINST AN ORDER U/S 263 OF THE ACT REVISING THE INVALID ORDER U/S 147 OF THE ACT. THIS ISSUE HAS BEEN ANALYSED BY THE HON'BLE MUMBAI BENCH OF THE TRIBUNAL IN THE CASE OF M/S. WESTLIFE DEVELOPMENT LTD. (SUPRA) AND 147 PROCEEDINGS HAS BEEN EQUATED TO PRIMARY PROCEEDINGS AND THE PROCEEDINGS U/S 263 PASSED EQUATED TO COLLATERAL PROCEEDINGS. IT HAS FURTHER BEEN HELD BASED ON VARIOUS JUDICIAL PRONOUNCEMENTS OF T HE HON'BLE SUPREME COURT THAT IF THE PRIMARY PROCEEDINGS ARE NON - EST IN LAW OR VOID ON THE GROUND OF LACK OF JURISDICTION THEN THE VALIDITY OF SUCH PROCEEDINGS CAN BE CHALLENGED EVEN 16 ITA NO. 2030/KOL/2018 A.Y 2010 - 11 M/S. ROZELLE SALES & SERVICES P.LTD. 16 IN AN APPEAL ARISING OUT OF COLLATERAL PROCEEDINGS. WE HAVE ALREADY SET OUT THE RATIO LAID DOWN IN THESE DECISIONS AT CL WE DO NOT WISH TO REPEAT THE SAME. SUFFICE IT TO SAY THE LAW IS WELL SETTLED THAT INVALIDITY OF THE PRIMARY PROCEEDINGS FOR WANT OF PROPER JURISDICTION CAN BE CHALLENGED EVEN IN APPELLATE PROCEEDINGS ARISING OUT OF A COLLATERAL PROCEEDING. IN VIEW OF THE AFORESAID LEGAL POSITION WE ADMIT THE ADDITIONAL GROUNDS FOR ADJUDICATION. 1 0 . WE CONCLUDE IN VIEW OF THE ABSTRACTED DETAILED DISCUSSION THAT THE ASSESSEE IS VERY MUCH ENTITLED TO CHALLENGE VALIDITY OF T HE ABOVE SAID RE - ASSESSMENT IN COLLATERAL PROCEEDINGS. 11. WE NOW PROCEED TO READ WITH LATTER MOST IMPORTANT ISSUE OF VALIDITY OF RE - OPENING/RE - ASSESSMENT FRAMED ON 30.11.2017 . BOTH THE LEARNED REPRESENTATIVES TAKE US TO THE ASSESSING OFFICERS RE - OPENING REASONING RECORDED AS UNDER: - REASONS FOR BELIEF THAT INCOME HAS ESCAPED ASSESSMENT: A SEARCH & SEIZURE OPERATION WAS CONDUCTED ON 25.08.2015 IN THE GHNSHYAM SARADA GROUP OF CASES. DURING THE SEARCH AND THE POST SEARCH PROCEEDINGS IT WAS FOUND THAT SOME OF THE COMPANIES CONTROLLED AND MANAGED BY GOPAL SARADA WHICH INTER ALIA INCLUDE ROZELLE SALES & SERVICES PVT. LTD HAS RAISED CAPITAL AT PREMIUM DURING FINANCIAL YEAR 2009 - 10, THE DETAILS IS GIVEN UNDERNEATH: - SL. NO. NAME OF COMPANY DATE OF ALLOTMENT PREMIUM TOTAL AMOUNT 1 ROZELLE SALES AND SERVICES PVT. LTD 31/03/2010 490 5,00,00,000 PAGES 258 OF THE APPRAISAL REPORT ALSO GIVES THE DETAILS OF THE PAPER/JAMA KHARCHI COMPANIES TO WHOM SHARES WEE ALLOTTED AT PREMIUM OF RS.490/ - SL.N O. NAME ADDRESS NO. OF SHARES ALLOTTED AMOUNT 1 ASTHA COMMOSALES PVT. LTD 161 RABINDRA SARANI, KOL - 7 9000 45,00,000/ - 2. BASUKINATH CONSTRUCTIONS 23B N.S ROAD, 2 ND FL., 10000 50,00,000/ - 17 ITA NO. 2030/KOL/2018 A.Y 2010 - 11 M/S. ROZELLE SALES & SERVICES P.LTD. 17 PVT. LTD KOL - 1 3. BASUKINATH DEVELOPERS PVT. LTD - DO - 3000 15,00,000/ - 4. BONANZA TRADELINK PVT. LTD 120 KRISHNAGAR, KOL - 56 6000 30,00,000/ - 5 DARKWELL MERCANTILE PVT. LTD 9 LALBAZAR ST., KOL - 1 7000 35,00,000/ - 6. DISTANT VINIMAY PVT. LTD - DO - 3000 15,00,000/ - 7. DREAM GOODS PVT. LTD 161,RABINDRA SARANI, KOL - 7 2000 10,00,000/ - 8. DONALD MANAGEMENT PVT. LTD 2, N.C DUTTA ROAD, KOL - 1 7000 35,00,000/ - 9. GAZEBO COMMERCE PVT. LTD. 37/1 ADINATH SAHA RD, KOL - 48 6800 34,00,000/ - 10. NICE COMMOTRADE PVT. LTD 161 RABINDRA SARNI , KOL - 7 2000 10,00,000/ - 11. PARK TRADE LINK PVT. LTD 89, N.S ROAD, KOL - 1 5000 25,00,000/ - 12. RELICO MINCHEM EXPORTS PVT. LTD 9/12 LAL BAZAR ST., KOL - 1 5200 26,00,000/ - 13 RISING VINCOM PVT. LTD 159, RABINDRA SARANI, KOL - 7 2000 10,00,000/ - 14 SUMANGAL DEVELOPERS PVT. LTD GB 4/4 RABINDRA PALLY, BAGUIATI, KOL - 59 7000 35,00,000 / - 15 SWASTIK FINANCIAL CONSULTANT PVT. LTD 159 RABINDRA SARANI, KOL - 7 6000 30,00,000/ - 16 URCH TRADERS PVT. LTD 161 RABINDRA SARANI, KOL - 7 11000 55,00,000/ - 17 VARDHAMAN CONSULTANCY & ADVISORY PVT. LTD 25D, HARISH MUKHERJEE RD., KOL - 25 3000 15,00,000 HENCE THE ASSESSEE ALLOTTED TOTAL 1,00,000 NUMBER OF SHARES FOR AN AMOUNT OF RS.5,00,00,000/ - WHICH INCLUDES PREMIUM OF RS.4,90,00,000/ - COLLECTED @ RS.490/ - PER SHARE. THE RETURNS FILED BY THE ASSESSEE FOR A.YS 2009 - 10 & 2010 - 11 HAVE BEEN PERUSED. THE SHARE CAPITAL OF THE ASSESSEE AND PREMIUM ALONGWITH QUANTUM OF SALES AND PROFIT BEFORE TAX FOR A.YS 2009 - 10 AND 2010 - 11 IS DEPICTED BELOW: A.Y SHARE CAPITAL PREMIUM SALES PROFIT BEFORE TAX 2009 - 10 68,79,000/ - 90,00,000/ - 4,12 CRORE - 48,580/ - 2010 - 11 78,79,000/ - 5,80,00,000/ - 6.94 CRORE - 73,111 18 ITA NO. 2030/KOL/2018 A.Y 2010 - 11 M/S. ROZELLE SALES & SERVICES P.LTD. 18 CLEARLY THE SALE AND THE NET LOSS DOES NOT IN ANY WAY JUSTIFY THE PREMIUM T HE COMPANY HAS COMMANDED FOR ISSUE OF SHARES DURING FINANCIAL YEAR 2009 - 10. IT MAY BE PERTINENT 10 MENTION HERE THAT DURING THE POST SEARCH PROCEEDINGS STATEMENT OF SHRI SURESH KUMAR PANSUKHA, ENTRY OPERATOR WAS RECORDED U/S 131, AND HE ACCEPTED THAT TH E SHARE CAPITAL WAS RAISED THROUGH HIS SHELL/JAMAKHARCHI COMPANIES WHICH ORE MANAGED AND CONTROLLED BY HIM (PAGE 277 10 280 OF THE APPRAISAL REPORT). RELEVANT PORTION OF THE STATEMENT IS FURNISHED BELOW: Q7. DO YOU KNOW THE COMPANIES NAMELY ROZELLE SALE S & SERVICES PVT. LTD, NILLIMAPATHY RACON PVT LTD, P.R NIRYAAT PVT LLD, SUMMON VANIJYA LID AND URCHI TRADERS PVT LTD? IF YES, PLEASE STOLE THE BUSINESS RELATION BETWEEN THEM AND YOU. ANS: SIR, P R NIRYAAAT PVT LTD, SUMMBN VANIJYA PVT LLD AND URCHI TRADE RS PVT. LTD ARE SHELL/JAMAKHARCHI COMPANIES CONTROLLED AND MANAGED BY ME. THESE COMPANIES HAVE INVESTED IN THE SHORE CAPITAL OF ROZELLE SALES & SERVICES PVT LTD AND NILIMAPATHY TRACON PVL LTD. THE EXACT DETAILS ARE NOT KNOWN TO ME NOW. I WANT TO STATE TH AT I HAVE ALREADY RECORDED A STATEMENT IN RESPECT OF URCHI TRADERS PVL LTD BEFORE THE DDIT(LNV) UNIT 2(3), KOLKATA. Q8. I AM SHOWING YOU THE SHARE ALLOTMENT LIST OF ROZELLE SALES & SERVICES PVT T.TD. NILLIMAPALHY TRACON PVT. LTD IN WHICH YOUR SHELL COMPANIES LIKE P R NIRYAAT PVT LTD. SUMMON VANIJYA PVT LTD AND URCHI TRADERS PVT LTD HAVE SUBSCRIBED IN THE SHARES OF ABOVEMENTIONED COMPANIES. PLEASE STATE THE NATURE AN'CRSI3URCE OF SUCH TRANSACTIONS. ANS: SIR, AS EARLIER STATED TH E COMPANIES LIKE P R NIRYAAT PVL LTD, SUMMON VANIJYA PVT LID AND URCHI TRADERS PVT LLD HAVE INVESTED IN THE SHARE CAPITAL OF ROZELLE SALES & SERVICES PVT LTD, NILLIMOPATHY TRACON PVT LTD . THESE TRANSACTIONS ARE NOTHING BUT ROTATION OF UNACCOUNTED INCOME/F UNDS OF ROZELLE SALES & SERVICES PVT LLD AND NILLIMOPATHY TRACON PVT LLD WHICH WERE FINALLY TRANSFERRED IN THE ACCOUNT OF THESE COMPANIES IN THE GUISE OF SHARE CAPITALS INCLUDING PREMIUM. Q10.PLEOSE STATE THE NAME AND ADDRESS OF OTHER BENEFICIARIES FOR W HOM YOU HAVE DONE ACCOMMODATION ENTRIES. ANS: BESIDES ABOVE MENTIONED CO M P A NIES NAMELY ROZELLE SALES & SERVICES PVT LTD AND NILLIMAPATHY TRACON PVT LTD, I CAN NOT RECOLLECT OTHER BENEFICIARIES. APART FROM THE ABOVE AN INDICATIVE C A SH TRAIL HAS ALSO BEE N GIVEN IN PAGE 281 OF THE APPRAISAL REPORT. 19 ITA NO. 2030/KOL/2018 A.Y 2010 - 11 M/S. ROZELLE SALES & SERVICES P.LTD. 19 CLEARLY THE FACTS NARRATED ABOVE REVEAL THAT: I) THE COMPANY DID NOT HAVE THE REQUIRED FUNDAMENTALS TO F ELCH SUCH A HUGE PREMIUM . II) THE STATEMENT OF ENTRY OPERATO R SHRI SURESH KUMAR PANSUNKHA CLEARLY REV EALS THAT UNACCOUNTED INCOME OF TILE GROUP W A S BROUGHT BACK IN THE GUISE OF SHARE CAPITAL THROU G H JAMA KHARCHI COMPANIES. IN VIEW OF THE ABOVE, IT MAY BE INFERRED THAT UNACCOUNTED INCOME OF THE GROUP WAS BROUGHT BACK IN THE G UISE OF SHARE CAPITAL WHICH W AS PREARRANGED, TAILOR - MADE, AND NOTHIN G BUT ACCOMMODATION ENTRY. I HAVE THEREFORE, REASONS TO BELIEVE THAT INCOME CHARGEABLE TO INCOME HAS ESCAPED ASSESSMENT. WHICH WARRANTS ISSUE OF NOTICE U/S 148. 12. THE ABOVE EXTRACTED RE - OPENING REASONS SUFFICIENTLY INDICATE THAT THE ASSESSING OFFICER HAS NARRATED THE RELEVANT FACTUAL BACKDROP OF THE SEARCH ACTION DATED ON 25.05.2015 IN M/S. GHNASHYAM SARADA GROUP CASES. HE THEREAFTER FOUND REASONS TO BELIEVE THAT THE ASSESSEE HAD RECEIVED SHARE APPLICATION AND SHARE PREMIUM OF RS. 5 CRORES INCLUDING LATTER HEAD FIGURE OF RS. 4.90 CRORES @ RS.490 PER SHARE. HE WAS OF THE VIEW THAT THE ASSESSEE S SALES AND NET LOSS DID NOT JUSTIFY THE AFORESAID EXORBITANT PREMIUM . THE ASSESSING OFFICER REFERRED TO TH E ENTRY OPERATORS STATEMENT (SUPRA) THAT HIS SHELL/JAMA KHARCHI ENTITIES NAMELY M/S. P. R NIRYAAT PVT. LTD M/S. SUMAN VANIJYA, M/S. URCH TRADERS P.LTD (SUPRA) HA D INVESTED IN ASSESSEES SHARE CAPITAL. HE THEREAFTER RENDE RED THAT THE ASSESSEE S FUNDAMENTAL S COULD NOT JUSTIFY THE FOREGOING EXORBITANT PREMIUM. AND THAT IT HAD LOUGHED BACK THE GROUPS UNACCOUNTED INCOME IN THE GUISE OF SHARE CAPITAL RECEIVED THROUGH SHELL/JAMAKHARCHI COMPANIES. 13. W E OBSERVE THAT IN THIS BACKDROP OF FACTS OF RE - OPENING REASONS THAT THE ASSESSING OFFICER HAS NOWHERE FORMED HIS BELIEF OF ASSESSEES TAXABLE INCOME HAVING ESCAPED ASSESSMENT OF PLOUGHING BACK OF THE UNDISCLOSED INCOME. WE WISH TO RE - EMPAHSISE ON THE ABOVE EXTRACTED REASONS OF RE - OPENING ARE MERELY AN INFERENCE THAN 20 ITA NO. 2030/KOL/2018 A.Y 2010 - 11 M/S. ROZELLE SALES & SERVICES P.LTD. 20 A BELIEF TO THIS EFFECT. L EARNED CIT/DR AT THIS STAGE HAS FILED COPY OF HONBLE APEX COURTS DECISION (2017) 77 TAXMAN N . C OM 285 (SC) R AJMANDIR ESTATES PVT. LTD V/S. PCIT BY HOLDING HONBLE JURISDICTIONAL HIG H COURTS DECISION AFFIRM ING THE TRIBUNALS CO - ORDINATE BENCHS ORDER DECL INING VARIOUS TAXPAYERS APPEALS AGAINST THE CITS SIMILAR REVISION EXERCISE IN CASE OF SHELL ENTITIES HAVING SUBSCRIBED TO THEIR SHARE CAPITAL WHICH HAD NOT BEEN INVESTIGATED DURING THE COURSE OF ASSESSMENT/RE - ASSESSMENT . MR. NAYAK SUBMITS THAT THE INSTANT INVOLVES IDENTICAL PLEADINGS SINCE THIS TAXPAYER HAS OBTAINED ACCOMMODATION ENTR IES IN THE NATURE O F SHARE CAPITAL BY WAY OF VARIOUS JAMA KHARCHI COMPAN IES . WE FIND NO MERIT IN THE R EVENUES ARGUMENTS. WE RE - EMPHASISE THAT THE FIRST AND FOREMOST ISSUE BEFORE US IS THAT IF VALIDITY OF THE ASSESSING OFFICERS INITIATING SEC. 148 PROCEEDINGS QUA REVISION PROCEEDINGS . THE ASESSING OFFICER HAD ALLEGED THAT TH REE OF T HE ENTITY OPERATORS ENTITIES HAD MADE INVESTMENTS IN ASSESSEES STAKE. THE SAME GOES ADJUDICATOR FACTS ON RECORD SINCE THIS TAXPAYER HAD RECEIVED SHARE APPLICATION/SHARE PREMIUM FROM ONE OF THE SAID ENTITY M/S. URCH TRADERS P.LTD ONLY TO THE TUN E OF RS. 55 LAKHS , WHICH STOOD ADDED AS UNEXPLAINED CASH CREDIT U/S. 68 OF THE ACT. H ONBLE BOMAY HIGH COURTS DECISION IN HINDUSTHAN L E VER LTD V/S. R.B WADHAR (2004) 260 ITR 332 (BOM) HELD THAT THE ASSESSING OFFICERS RE - OPENING REASONS HAVE TO BE REA D ON STANDALONE BASIS AND NO SUBSTITUTION OR DELETION IS PERMISSIBLE. HONBLE JURISDICTIONAL HIGH COURTS DECISION IN EQUITABLE INVESTMENT (1988) 174 ITR 714 (CAL.) ALSO HOLDS THAT WHEN SECTION 148 NOTICE IS ISSUED AFTER THE CITS APPROVAL IS CHALLENGED ONLY THE REASONS RECORDED FOR OBTAINI NG SUCH AN APPROVAL. . 1 4 . LEARNED CIT/DR AT THIS STAGE VEHEMENTLY CONTENDS THAT ASSESSING OFFICER HAD INITIATED SECTION 148 PROCEEDINGS AGAINST TAX PAYER INVOKING SEC 143(1) PROCESSING. HE BUTTRESS THE R EVENUES STAND THAT ASSESSING OFFICER S REASON S TO BELIEVE HAVE TO BE RECORDED AS PER PRIMA FACIE MATERIAL ONLY AS PER HONBLE GUJRAT HIGH COURTS DECISION IN PCIT V/S. LAXMIRAJ DISTRIBUTORS ITA NO. 472/17 DATED 6.9.2017. WE FIND NO REASON TO 21 ITA NO. 2030/KOL/2018 A.Y 2010 - 11 M/S. ROZELLE SALES & SERVICES P.LTD. 21 ACCEPT THE REVENUES INSTANT ARGUMENTS AS THE FACT REMAINS THAT ASSESSEE HAS RECEIVED SHARE APPLICATION OF RS. 55 LAKHS ONLY IN CASE OF ON E OUT OF THREE JAMAKHARCHI COMPANIES AND THE SAME STOOD ADDED U/S. 68 OF THE ACT (SUPRA). 1 5 . IT FURTHER TRANSPIRES DURING THE COURSE OF HEARING THAT SHRI PRANSUKHA WAS NEITHER PROMOTER NOR D IRECTOR OF THE SAID ENTITY . WE ALSO FIND THAT ASSESSING OFFICERS RE - OPENING REASONS FORMED DO NOT SATISFY THE SETTLED LAW AS PER H ONBLE DELHI HIGH COURTS DECISION ON THE VERY ISSUE IN PCIT V/S. RM G POLYVINYL (I) LTD. (2017) 396 ITR 5 (DEL) UPHOLD ING THE TRIBUNAL S ORDER QUASHING SIMILAR RE - OPEING BASED ON INVESTMENTS, WHEREIN THE ASSESSING OFFICER HAD NOWHERE UNDERTAKEN ANY INDEPENDENT ENQUIRY. THUS L ORDSHIPS HOLD THAT MERE SUCH AN INFORMATION COULD NOT BE TREATED AS TANGIBLE MATERIAL FOR THE PURP OSE OF INITIATION OF 148/147 PROCEEDINGS. SIMILAR CASE LAW CIT V/S. INSECTICIES (2013) 357 ITR 330, M/S. SABH INFRASTRUCTURE V/S. ACIT (2017) 398 198 ALSO ECHOE S THE VERY RATIO. THE ABOVE LATTER JUDICIAL PRECEDEN T HOLDS THAT THE ASSESSING OFFICER MUST ALSO SUPPLY REPORT/DOCUMENT AS RELIED UPON BY HIM. COUPLED WITH THIS, TRIBUNALS CO - ORDINATE BENCHS ORDER IN GREAT WALL MARKETING (P) LTD V/S.DCIT ITA NO. 660/KOL/2011 DECIDED ON 3 - 2 - 2016 ALSO HOLDS A SIMILAR RE - OPENING BASED ON INVESTIGATION REPORT WITHOUT A SSESSING OFFICERS APPLICATION OF MIND A IS NOT SUSTAINABLE VIDE THE FOLLOWING DETAILED DISCUSSION 7. BEFORE US THE LEARNED COUNSEL FOR THE ASSESSEE FILED A PETITION UNDER RULE 27 OF ITAT RULES. AS PER RULE 27 OF ITAT RULES 1963, A RESPONDENT IN AN APPE AL, THOUGH HE MAY NOT HAVE APPEALED, MAY SUPPORT THE ORDER APPEALED AGAINST ANY OF THE GROUNDS RAISED AGAINST HIM. SINCE THE ISSUE WITH REGARD TO THE VALIDITY OF INITIATION OF PROCEEDINGS U/S 148 OF THE ACT WAS DECIDED AGAINST THE ASESSEE, THE ASSESSEE WIT HOUT FILING A CROSS OBJECTION HAS SOUGHT TO CHALLENGE THE ORDER OF CIT(A) UPHOLDING THE VALIDITY OF INITIATION OF RE - ASSESSMENT PROCEEDINGS U/S 148 OF THE ACT. THE APPLICATION UNDER RULE 27 HAS THEREFORE TO BE DECIDED. 22 ITA NO. 2030/KOL/2018 A.Y 2010 - 11 M/S. ROZELLE SALES & SERVICES P.LTD. 22 8. WE HAVE HEARD THE SUBMISSIONS OF THE LEARNED COUNSEL FOR THE ASSESSEE BOTH ON THE VALIDITY OF INITIATION OF RE - ASSESSMENT PROCEEDINGS AS WELL AS THE MERITS OF THE APPEAL. NONE APPEARED ON BEHALF OF THE DEPARTMENT. A.YR.2002 - 03 8.1. WE HAVE CONSIDERED THE SUBMISSIONS OF THE LEARNED CO UNSEL FOR THE ASSESSEE. AS FAR AS THE VALIDITY OF INITIATION BF RE - ASSESSMENT PROCEEDINGS ARE CONCERNED THE REASONS RECORDED BY THE AO FOR INITIATING PROCEEDINGS U/S 148 ARE AS FOLLOWS : - 'NO. DCIT/CIR - 6/REASONS FOR REOPENING/09 - 1 0 DATED 22/04/2009 TO THE PRINCIPAL OFFICER GREATWALL MARKETING (P) LTD. CLO SRI. S.M. DAGA 11: CLIVE ROW, ROOM NO. 2 .Z - . FIR. KOLKATA - 700001. SIR. SUB: RECORDED REASONS FOR REOPENING IN THE CASE OF GREATWALL MARKETING (P) LTD. FOR ASST. YR. 02 - 03 REF: YOUR LETTER DATED 02/04/09 PLEASE REFER TO THE ABOVE. AS PER INFORMATION RECEIVED FROM INVESTIGATION WING NEW DELHI THE INTRODUCED SHARE CAPITAL DURING THE YEAR. HAD BEEN RECEIVED FROM CORPORATE BODIES WHICH A RE NON EXISTENT AND WHOSE CAPACITY TO INVEST ( CREDIT WORTHINESS) COULD NOT BE ESTABLISHED. THEREFORE I HAVE REASONS TO BELIEVE THAT UNEXPLAINED CASH CREDIT HAD BEEN INTRODUCED IN YOUR BOOKS OF ACCOUNTS IN THE NAME OF INTRODUCTION OF SHARE CAPITAL AND RECE IPT OF SHARE APPLICATION MONEY. IN ABSENCE OF SATISFACTORY IDENTITY AND CREDIT WORTHINESS OF THE OTHER PARTIES. THE ENTIRE INTRODUCED CAPITAL AND SHARE APPLICATION MONEY WILL BE TREATED AS YOUR INCOME FOR THAT YEAR. I WILL THEREFORE CONTINUE THE PROCEEDINGS FOR REASSESSMENT OF YOUR RETURN U/S 147. STATUTORY NOTICES U/S 143(2) AND 142(1) ARE ENCLOSED HEREWITH. YOURS FAITHFULLY. SD/ - 23 ITA NO. 2030/KOL/2018 A.Y 2010 - 11 M/S. ROZELLE SALES & SERVICES P.LTD. 23 ( SANJAY MUKHERJEE) DCIT ICIR - 6/KOL ' 8.2. THE SUBMISSIONS OF THE LEARNED COUNSEL FOR THE ASSESSEE BEFORE US WAS THAT THE REASONS RECORDED BY THE AO WERE MERE INFORMATION RECEIVED FROM D.I.T.(INVESTIGATION), NEW DELHI. THERE WAS NO INDEPENDENT APPLICATION OF MIND BY THE AO BASED ON WHICH IT CAN BE SAID THAT HE ARRIVED AT THE SATISFACTION THAT THE INCOME OF THE AS SESSEE IS CHARGEABLE TO TAX HAS ESCAPED ASSESSMENT. IT WAS SUBMITTED THAT ITA NO.660/KOIL20 11 GREAT WALL MARKETING (P)LTD. A.YR.2002 - 03 INFORMATION RECEIVED BY THE AO WAS VAGUE AND UNCERTAIN AND CANNOT BE CONSTRUED TO BE SUFFICIENT AND RELEVANT MATERIAL ON THE BASIS OF WHICH REASONABLE PERSON CAN FORM BELIEF REGARDING ESCAPEMENT OF INCOME. RELIANCE WAS PLACED BY THE LEARNED COUNSEL FOR THE ASSESSEE ON THE DECISION OF THE HON'BLE DELHI HIGH COURT IN THE CASE OF CIT VS INSCETICIDES (INDIA) LTD 357 ITR 330 AND CIT VS SFIL STOCK BROKING LTD. 325 ITR 285 (DELHI). IN BOTH THE AFORESAID DECISIONS THE REASONS RECORDED BY THE AO FOR INITIATING PROCEEDINGS US 148 OF THE ACT THE HON'BLE DELHI HIGH COURT UPHELD THE ORDER OF THE TRIBUNAL QUASHING THE PROCEEDINGS. RELI ANCE WAS ALSO PLACED ON THE DECISION OF ITAT, KOLKATA 'C' BENCH IN THE CASE OF M / S. CONTROLLA ELECTROTECH (P)LTD VS DCIT IN ITA NOS.1443 & 1444/KOLL2014 WHEREIN ON IDENTICAL FACTS THE TRIBUNAL WAS PLEASED TO QUASH THE REASSESSMENT PROCEEDINGS. ON MERITS TH E LEARNED COUNSEL FOR THE ASSESSEE RELIED ON THE ORDER OF CIT(A). 9. WE HAVE GIVEN A CAREFUL CONSIDERATION OF THE SUBMISSIONS MADE BY THE LEARNED COUNSEL FOR THE ASSESSEE. IT IS CLEAR FROM THE REASONS RECORDED BY THE AO THAT THE AO ACTED ONLY ON THE BASI S OF A LETTER RECEIVED FROM INVESTIGATION WING, NEW DELHI. THE REASONS RECORDED DOES NOT GIVE AS TO WHO HAS GIVEN THE BOGUS ENTRIES TO THE ASSESSEE. THE REASONS RECORDED ALSO DOES NOT MENTION AS TO ON WHICH DATES AND THROUGH WHICH MODE THE BOGUS ENTRIES WE RE MADE BY THE ASSESSEE. THE REASONS RECORDED WHICH ARE EXTRACTED IN THE EARLIER PART OF THE ORDER DOES NOT SHOW, WHAT WAS THE INFORMATION GIVEN BY DIT(INV.),NEW DELHI. THE DATE OF THE INFORMATION RECEIVED BY THE AO WERE NOT SPELT OUT IN THE REASONS RECORD ED. THE INVOLVEMENT OF THE ASSESSEE IS ALSO NOT SPELT OUT, EXCEPT MENTIONING THE CORPORATE BODIES WHO HAD SUBSCRIBED TO THE SHARE CAPITAL OF THE ASSESSEE WERE NON - EXISTENT AND NOT CREDITWORTHY. ON IDENTICAL FACTS THE HON'BLE DLEHI HIGH COURT IN THE CASE OF CIT VS INSECTICIDES (INDIA) LTD (SUPRA) HAS TAKEN A VIEW THAT THE REASONS RECORDED WERE VAGUE AND UNCERTAIN AND CANNOT BE CON TRUED AS SATISFACTION ON THE BASIS OF THE RELEVANT MATERIAL ON 24 ITA NO. 2030/KOL/2018 A.Y 2010 - 11 M/S. ROZELLE SALES & SERVICES P.LTD. 24 THE BASIS OF WHICH A REASONABLE PERSON CAN FORM A BELIEF THAT INCO ME HAS ESCAPED ASSESSMENT. THE HON'BLE DELHI HIGH COURT HAS ALSO COME TO THE CONCLUSION THAT THE REASONS RECORDED DID NOT DISCLOSE THE AO'S MIND REGARDING ESCAPEMENT OF INCOME. THE HON'BLE DELHI HIGH COURT ULTIMATELY HELD THAT INITIATION OF PROCEEDINGS U/S 148 OF THE ACT WAS NOT VALID AND ITA NO.6601K01J2011 GREAT WALL MARKETING (P)LTD. A.YR.2002 - 03 JUSTIFIED IN THE EYES OF LAW. THE FACTS AND CIRCUMSTANCES IN THE PRESENT CASE ARE IDENTICAL TO THE CASE DECIDED BY THE HON'BLE DELHI HIGH COURT. FOLLOWING THE SAID DECISION WE HOLD THAT INITIATION OF RE - ASSESSMENT PROCEEDINGS IS NOT VALID. ON THIS GROUND, THE ASSESSMENT IS LIABLE TO BE ANNULLED. 1 6 . WE OBSERVE IN THE LIGHT OF ABOVE NARRATED FACTS AND JUDICIAL PRECEDENTS THAT THE ASSESSING OFFICER HAS ERRED IN INITIATING THE IMPUGNED RE - OPENING, WHICH IS AGGRIEVED THE ASSESSEE. WE THEREFORE QUASH THE SAME AS NON EST. THAT BEING THE CASE THE P CITS ASSUMPTION OF REVISION JURISDICTION U/S. 263 OF THE ACT MUST ALSO FOLLOW THE S UIT SINCE IT HAS NO LEGS TO STAND. THE ASSESSEE SUCCEEDS ON THE FOREGOING LEGAL ISSUE. ALL OF ITS ARGUMENTS ON MERITS THAT PCIT HAS WRONGLY EXERCISED SEC 263 REVISION JURISDICTION ON VARIOUS FACTS IN THE INSTANT APPEAL ARE RENDERED INFRUCTUOUS. WE MAKE IT C LEAR THAT WE HAVE QUASHED THE ABOVE STATED RE - OPENING/RE - ASSESSMENT TO THE EXTENT OF VALIDITY OF PCIT REVISION JURISDICTION EXERCISE IN THE INSTANT CASE ONLY. NECESSARY CONSEQUENCES IN PURSUANCE TO ASSESSING OFFICERS RE - ASSESSMENT DATED 30 - 11 - 2017 SHALL CONTINUE TO FOLLOW. 1 7 . TH IS ASSESSEES APPEAL IS ALLOWED IN ABOVE TERMS. ORDER PRONOUNCED IN THE COURT ON 30 - 0 8 - 2019 SD/ - SD/ - [ J.SUDHAKAR REDDY ] [ S.S.GODARA ] ACCOUNTANT MEMBER JUDICIAL MEMBER DATED : 30 - 0 8 - 2019 25 ITA NO. 2030/KOL/2018 A.Y 2010 - 11 M/S. ROZELLE SALES & SERVICES P.LTD. 25 **PRADIP, SR. PS C OPY OF THE ORDER FORWARDED TO: 1 . APPELLANT/ ASSESSEE: M/S. ROZELLE SALES & SERVICES PVT. LTD ROOM NO. 407, 187, RABINDRA SARANI, BURRA BAZAR, 187 KOLKATA - 7. 2. RESPONDENT/ DEPARTMENT : THE ACIT, CENTRAL CIRCLE - 1(1), KOLKATA, 110 SHANTIPALLY, NEAR: RUBY HOS., EM BYE PASS, KOLKATA - 17. 3..C.I.T (A) . - 4. C.I.T. - KOLKATA. 5. CIT(DR), KOLKATA BENCHES, KOLKATA. TRUE COPY BY ORDER ASSISTANT REGISTRAR H.O.O/D.D.O KOLKATA