Techno Tracom Pvt. Ltd., Kolkata V. ACIT, Cir.1(2), Kolkata

ITA 205/KOL/2021

• Counselvise Citation: [2022] 105 COUNSELVISE.COM (IT) 4471 (ITAT-KOLKATA)
• Duration Of Justice: 9 month(s) 13 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 17-04-2022
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: B
• Assessment Year: 2009-2010
• Appeal Filed On: 04-07-2021
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: SUDIPTA GUHA
• Keywords: Gift; Revision of order; Question of law; Valuation report; Assessment record; Set aside
• Section: 68; 263; 143(3); 142(1); 153A; 133(6); 72; 13; 119

Judgement Text

1 ITA No.205/Kol/2021 Techno Tracom Pvt. Ltd., AY: 2009-10 IN THE INCOME TAX APPELLATE TRIBUNAL “B” BENCH, KOLKATA [Before Shri A. T. Varkey, JM & Shri Rajesh Kumar, AM] I.T.A. No. 205/Kol/2021 Assessment Year: 2009-10 Techno Tracom Pvt. Ltd. (PAN: AACCT9559J) Vs. Assistant Commissioner of Income- tax, Central Circle-1(2), Kolkata. Appellant Respondent Date of Hearing 11.03.2022 Date of Pronouncement 18.04.2022 For the Appellant Shri S. M. Surana, Advocate For the Respondent Shri Sudipta Guha, CIT, DR ORDER Per Shri A.T.Varkey, JM This is an appeal preferred by the assessee against the order of Ld. Pr. CIT, Central- 1, Kolkata dated 30.03.2021 for AY 2009-10 passed u/s. 263 of the Income-tax Act, 1961 (hereinafter referred to as the “Act”). 2. This appeal of assessee is time barred by 37 days. After hearing both the parties, we condone the delay in filing the appeal and admit the appeal for hearing. 3. Main grievance of the assessee is against the action of the Ld. Pr. CIT, Central-1, Kolkata to have invoked the jurisdiction u/s. 263 of the Act without satisfying the essential condition precedent stipulated u/s. 263 of the Act i.e. without validly holding the order of the AO to be erroneous as well as prejudicial to the interest of the revenue. 4. Brief facts of the case are that assessee in the original round of assessment dated 28.03.2011 accepted the return of income at Rs.68,410/-. Later on, the Ld. Pr. CIT interdicted the order of the AO dated 28.03.2011 by an order dated 28.03.2013 wherein he was pleased to cancel the order of the AO and directed the AO to pass fresh assessment by looking into the share capital and premium collected by the assessee during the relevant year under consideration. 2 ITA No.205/Kol/2021 Techno Tracom Pvt. Ltd., AY: 2009-10 5. Being aggrieved by the action of the Ld. Pr. CIT, the assessee preferred an appeal before this Tribunal on the ground that the Ld. Pr. CIT did not give proper opportunity to the assessee which contention of the assessee was accepted by this Tribunal and the Tribunal was pleased to set aside the order of the Ld. Pr. CIT dated 28.03.2013 and directed the Ld. Pr. CIT to pass fresh orders after hearing the assessee. 6. Meanwhile, a search happened in the assessee’s premises on 18.02.2013 and the file of the assessee was transferred from the jurisdictional AO [Ward-8(3)] to the Central Circle on 13.08.2013. Thereafter, the AO, Central Circle passed the order u/s. 153A of the Act dated 23.03.2015 wherein he has not taken any adverse view against the assessee in respect of the share capital/premium. 7. In the light of the developments which took place after the search operation as aforestated, the assessee preferred Misc. Application before the Tribunal and the Tribunal was pleased to pass an order on 22.01.2020 wherein it observed that the Ld. Pr. CIT may look into the arguments of assessee regarding the later developments/order passed by the AO, Central Circle dated 23.03.2015 (post search) while considering the deficiency regarding lack of enquiry he noticed in the original order of the AO (dated 28.03.2011). The relevant observation of the Tribunal dated 22.01.2020 is extracted below: “In this Miscellaneous Application the assessee submits that adequate enquiries with regard to rising of share capital were conducted subsequently by the assessing authorities, in a post search assessment proceedings which culminated into assessment order u/s. 153A r.w.s. 143(3) of the Act for the very same assessment year was passed on 23.03.2015 and hence the order passed u/s. 263 of the Act by the Commissioner of Income-tax, Kolkata-III, Kolkata is bad in law, has to be rejected for the reason that, there is no mistake apparent on record in the impugned order of the Tribunal dated 01.10.2019 whether adequate enquiries were conducted in the subsequent proceedings u/s. 153A r.w.s. 143(3) of the Act or not, was not a subject matter before us. The Commissioner of Income Tax, Kolkata-III, Kolkata may consider these arguments before passing the order u/s. 263 dated 28.03.2013. hence, this Miscellaneous Application is rejected as devoid of merit.” 8. Thereafter, the Ld. Pr. CIT has passed the impugned order dated 30.03.2021 wherein he repelled the contention of the assessee that since the AO, Central Circle had enquired into the issue of share capital/premium, the original order of the AO (dated 28.03.2011) should not be considered as erroneous as well as prejudicial to the interest of the revenue. According to the assessee, while invoking the jurisdiction u/s. 263 of the Act, the Ld. Pr. CIT ought to have looked into the entire records before him of the previous year under consideration i.e. AY 2009-10. The assessee pointed out to the Ld. Pr. CIT the 3 ITA No.205/Kol/2021 Techno Tracom Pvt. Ltd., AY: 2009-10 definition given u/s. 263 of the Act regarding the meaning of ‘records’ which reads as under: “record” shall include and shall be deemed always to have included all records relating to any proceeding under this Act available at the time of examination by the Principal Commissioner or commissioner;” 9. However, the Ld. Pr. CIT did not agree to the contention of the assessee and repelled this contention at page 19 para (iii) of the impugned order which reads as under: “Third argument of Ld A/R is that during search assessment for AY 2009-10 u/s. 153A of the Act, assessing officer had made enquiry and verification in respect of share capital and share premium. In this regard. it is to be reiterated that in pursuance of order of Hon'ble ITAT dated 01/10/2019, present proceeding u/s. 263 of the Act, have been initiated in respect of order u/s. 147/143(3) dated 28/03/2011 and not in respect of order u/s. 153A dated 23/03/2015 passed for AY 2009-10. The assessment proceeding u/s. 143(3)/147 of the Act dated 28/03/2011 which were completed by AO in case of assessee for AY 2009-10, is an independent proceeding from proceeding undertaken u/s 153A of the Act. Completed assessment proceeding, does not become invalid, only because of the fact that there happens to be any subsequent reassessment proceeding for same AY under any other provision of law. Assessment order dated 28/03/2011, as well as disallowance/addition made in such order, remain valid, given that revisionary order passed u/s. 263 dated 28/03/2013, has been set aside by Hon'ble ITAT vide order dated 01/10/2019. Therefore, it becomes immaterial that what action has been taken during proceeding u/s 153A of the Act, as far as proceeding u/s. 263 against order u/s. 147/143(3) dated 28/03/2011, is concerned, Hence this argument of assessee is not re1evant to present proceedings as the question of adequacy of enquiries conducted in subsequent proceedings u/s. 153/143(3) of the Act, is not a subject matter of proceeding at hand.” 10. And thereafter, for the aforesaid reasons the Ld. Pr. CIT was pleased to set aside the original assessment order of the AO dated 28.03.2011 and directed the AO to again enquire into the share capital/premium collected by the assessee. Aggrieved by the aforesaid action of the Ld. Pr. CIT, the assessee is before us. 11. Assailing the action of the Ld. Pr. CIT, the Ld. Counsel for the assessee Shri S. M. Surana contended that since the issue which has been raked up by the Ld. Pr. CIT (share capital/premium) during the original assessment dated 28.03.2011 has already undergone proper investigation and adjudication by the AO, Central Circle pursuant to the search u/s. 132 of the Act, which culminated in the re-assessment order dated 23.03.2015 and since no adverse inference has been drawn by the AO, meaning the AO was satisfied with the identity, creditworthiness and genuineness of the share capital and premium collected by the assessee during the relevant AY i.e. AY 2009-10, this issue could not have been found to be erroneous for want of enquiry. Therefore, according to Ld. AR, the issue regarding share capital/premium had under gone proper enquiry and the AO being satisfied with the 4 ITA No.205/Kol/2021 Techno Tracom Pvt. Ltd., AY: 2009-10 nature and source of credit entry has not made any addition u/s. 68 of the Act, so according to him this issue cannot again be held by the impugned order to be erroneous for want of enquiry. In the light of this subsequent development, according to the Ld. AR, the Ld. Pr. CIT while exercising his jurisdiction u/s. 263 of the Act is bound to look into the subsequent action of AO i.e. reassessment order dated 23.03.2015, wherein he accepted the share capital and premium after enquiry; and the Ld. Pr. CIT has to follow the law that is prescribed u/s. 263 of the Act while exercising the revisional jurisdiction under it. According to him, the Ld. Pr. CIT having the supervisory jurisdiction over AO’s under his jurisdiction, has the power to call for records of any assessment proceedings and thereafter can examine it. And while examining it, if he finds any error or deficiency can intervene as per law. So, according to Ld. AR, while calling for records, he should look into the entire records of that assessment year. For buttressing this contention he drew our attention to the definition of ‘record’ (supra) [u/s. 263 of the Act.], which states that “all the records available at the time of examination and passing of the order by the Ld. Pr. CIT at the time of examination.” According to the Ld. Counsel, even though there was an observation by the Tribunal vide order dated 22.01.2020 wherein the Tribunal was pleased to observe that the Ld. Pr. CIT may look into the arguments raised by the assessee regarding further enquiry on the share capital and premium by AO during post search proceedings u/s. 153A of the Act, the Ld. Pr. CIT failed to look into the documents submitted by the assessee (re-assessment order passed by AO) u/s. 153A of the Act wherein the assessee has furnished all documents pertaining to the share capital and premium collected by the assessee during the relevant assessment year under consideration which has been thoroughly enquired into by the AO. Therefore, according to Ld. Counsel, the AO’s action on the issue of share capital and premium cannot be held to be erroneous as well as prejudicial to the revenue for lack of enquiry because the AO albeit in the second round has looked into the issue by making proper enquiry and so has discharged his dual role of an Investigator as well as adjudicator. Therefore, according to the Ld. Counsel, the assessee should not be again asked to undergo the assessment proceedings which are pertaining to a decade before i.e. AY 2009-10 and, therefore, he pleaded that the impugned order may be quashed for want of jurisdiction. 12. Per contra, the Ld. CIT, DR Shri Sudipta Guha opposed the contention of the Ld. AR and drew our attention to page no. 66 of paper book which is the notice issued by AO , 5 ITA No.205/Kol/2021 Techno Tracom Pvt. Ltd., AY: 2009-10 Central Circle and the reply submitted by the assessee wherein it has claimed to have furnished the documents regarding share capital and premium (refer page 67 of the paper book) before the AO, Central Circle (153A proceedings), and he submitted that merely filing certain documents before the AO would not discharge the burden on the shoulders of assessee u/s. 68 of the Act; and just because the AO asked about the share capital/premium and pursuant to it the assessee replied, it cannot be inferred that the issue of share capital and premium have been properly enquired into by the AO. In other words, according to Ld. CIT, DR, mere submission of certain documents cannot be the basis for drawing an inference that the AO, (Central Circle) has enquired properly into the issue of share capital and premium collected by the assessee. Therefore, according to Ld. CIT, DR, the Pr. CIT has the jurisdiction to see whether the AO has enquired properly into the issue of share capital and premium collected by the assessee in this assessment year and finding that AO has not properly enquired about it has duly set aside the AO’s order and has restored the issue back to the file of the AO for fresh enquiry which does not require any interference from our part and referred to two case laws in support of his submission: i) CIT Vs. Maithan International (2015) 56 Taxmann.com 283 (Cal); ii) Kumar Rajaram Vs. ITO (2016) 67 Taxmann.com 110 (Chennai. Trib.) 13. In his rejoinder to the Ld. CIT, DR’s submission that no proper enquiry was conducted by the AO (Central Circle) during post search assessment, the Ld. AR drew our attention to page no. 70 to 94 of paper book and brought to our notice that the AO, Central Circle in order to find out about ‘the nature and source’ of the share capital and premium had asked from the assessee about it and after taking note that twenty five (25) subscribers had subscribed for the shares, then had issued notice u/s. 133(6) of the Act to all the twenty five (25) share subscribers and after getting the reply/requisitioned documents which are available at page 95 to 119 of the paper book, and the AO after conducting enquiry/verification and being satisfied has not drawn any adverse inference against the assessee in respect of the share capital and premium. Therefore, according to Ld. AR, the contention of the Ld. CIT, DR that no proper enquiry has been conducted by the AO (Central Circle) on this issue is not correct and the AO’s order dated 23.03.2015 (post search) was part & parcel of the assessment folder of assessee for AY 2009-10; and since 6 ITA No.205/Kol/2021 Techno Tracom Pvt. Ltd., AY: 2009-10 it is part of the record, the Ld. Pr. CIT while exercising his revisional jurisdiction is bound to look into it and see whether the issue regarding share capital and premium has been enquired into albeit by the AO during the reassessment pursuant to search i.e. by taking note of the subsequent event (assessment u/s. 153A) ; and according to Ld. AR, if the Ld. Pr. CIT had taken into consideration the subsequent event/enquiry conducted by the AO after search regarding share capital, then he cannot on facts hold the AO’s action of accepting the share capital and premium as erroneous for want of enquiry. And in the light of the subsequent events which unfolded as stated, the action of AO cannot be held to be erroneous for lack of enquiry in respect of share capital and premium and, therefore, according to him, the Ld. Pr. CIT could not have interfered on the plea that AO did not enquire on this issue while passing the assessment order dated 28.03.2011. So, he pleads that the impugned order may be quashed being without jurisdiction. 14. We have heard rival submissions and gone through the facts and circumstances of the case. Before we advert to the facts and law involved in this lis before us, let us revisit the law governing the legal issue before us. The assessee has challenged in the first place, the very usurpation of jurisdiction by Ld. Principal CIT to invoke his revisional powers enjoyed u/s 263 of the Act. Therefore, first we have to see whether the requisite jurisdiction necessary to assume revisional jurisdiction is existing in this case before the Pr. CIT rightfully exercised his revisional power. For that, we have to examine as to whether in the first place the order of the Assessing Officer found fault by the Principal CIT is erroneous as well as prejudicial to the interest of the Revenue. For that, let us take the guidance of judicial precedence laid down by the Hon’ble Apex Court in Malabar Industries Ltd. vs. CIT [2000] 243 ITR 83(SC) wherein their Lordship have held that twin conditions needs to be satisfied before exercising revisional jurisdiction u/s 263 of the Act by the CIT. The twin conditions are that the order of the Assessing Officer must be erroneous and so far as prejudicial to the interest of the Revenue. In the following circumstances, the order of the AO can be held to be erroneous order, that is (i) if the Assessing Officer’s order was passed on incorrect assumption of fact; or (ii) incorrect application of law; or (iii)Assessing Officer’s order is in violation of the principle of natural justice; or (iv) if the order is passed by the Assessing Officer without application of mind; (v) if the AO has not investigated the issue before him; [ because AO has to discharge dual role of an investigator as well as that of an adjudicator ] then in aforesaid any event, the order passed by the Assessing Officer can be termed as erroneous order. Coming next to the second limb, 7 ITA No.205/Kol/2021 Techno Tracom Pvt. Ltd., AY: 2009-10 which is required to be examined as to whether the actions of the AO can be termed as prejudicial to the interest of Revenue. When this aspect is examined one has to understand what is prejudicial to the interest of the revenue. The Hon’ble Supreme Court in the case of Malabar Industries (supra) held that this phrase i.e. “prejudicial to the interest of the revenue’’ has to be read in conjunction with an erroneous order passed by the Assessing Officer. Their Lordship held that it has to be remembered that every loss of revenue as a consequence of an order of Assessing Officer cannot be treated as prejudicial to the interest of the revenue. When the Assessing Officer adopted one of the courses permissible in law and it has resulted in loss to the revenue, or where two views are possible and the Assessing Officer has taken one view with which the CIT does not agree, it cannot be treated as an erroneous order prejudicial to the interest of the revenue “unless the view taken by the Assessing Officer is unsustainable in law”. 15. Keeping the aforesaid judicial precedent in mind, while we adjudicate the jurisdiction of Ld PCIT to interfere u/s 263 of the Act, it is noted that in this case the assessee’s original assessment was made u/s. 143(3) of the Act dated 28.03.2011 wherein the AO was pleased to accept the return of income at Rs.68,410/-. Thereafter, the Ld. Pr. CIT interdicted the order of the AO dated 28.03.2011 by an order dated 28.03.2013 wherein he was pleased to cancel the order of the AO and directed the AO to pass fresh assessment by looking into the share capital and premium collected by the assessee during the relevant year under consideration. On appeal by the assessee before this Tribunal, the Tribunal set aside the order of the Ld. Pr. CIT dated 28.03.2013 passed u/s. 263 of the Act and directed him to give opportunity to the assessee and after hearing the assessee to pass fresh order. In the meantime it is noted that search happened in the assessee’s premises on 18.02.2013 and the file of the assessee was transferred from the jurisdictional AO [Ward-8(3)] to the Central Circle on 13.08.2013. Thereafter, the AO, Central Circle had passed the order u/s. 153A of the Act dated 23.03.2015, wherein he has made enquiries about the share capital and premium collected by the assessee and preferred not to take any adverse view against the assessee in respect of the share capital and premium collected by the assessee. In the light of the aforesaid development (post-search assessment order dated 23.03.2015) the assessee preferred a Miscellaneous Application before the Tribunal pleading that the latter development of the AO, Central Circle having had enquired about the share capital and premium collected by the assessee for AY 2009-10 may also be considered by the Ld. Pr. CIT while exercising his revisional jurisdiction u/s. 263 of 8 ITA No.205/Kol/2021 Techno Tracom Pvt. Ltd., AY: 2009-10 the Act pursuant to the order of the Tribunal in the first round dated 01.10.2019. The Tribunal disposed off the Misc. Application vide order dated 22.01.2020 wherein it was observed that the Ld. Pr. CIT may consider the plea of the assessee to consider the later development which happened during the search assessment dated 23.03.2015. However, the Ld. Pr. CIT while passing the impugned order dated 30.03.2021 has repelled the argument/contention of the assessee to look into the proceedings of search assessment. According to the assessee, in the post-search assessment proceedings, the AO had in fact enquired/looked into the identity, creditworthiness and genuineness of the share capital and premium collected by the assessee from twenty five (25) share subscribers. However, the Ld. Pr. CIT did not accept the plea of the assessee and was of the opinion that the revisional jurisdiction is against the order passed by the AO dated 28.03.2011 (original assessment) and since the Tribunal has set aside the revisional order passed by Ld. Pr. CIT u/s. 263 of the Act dated 28.03.2013 for fresh consideration, according to him, the assessment proceedings u/s. 153A of the Act dated 23.03.2015 is immaterial for examining the action of the AO in respect of assessment for AY 2009-10. And thereafter, the Ld. Pr. CIT after going through the assessment order passed by the AO dated 28.03.2011 held that the AO in that proceeding has not enquired into the nature and source of the share capital and premium collected by the assessee and, therefore, the order of the AO dated 28.03.2011 was erroneous as well as prejudicial to the revenue. The relevant portion of the Ld. Pr. CIT’s observation on this is found at page 31 of the impugned order which is reproduced as under: “In present case, the claim of introduction of share capital at abnormally high premium, has been allowed by assessing officer in a routine summary manner without application of mind and without making necessary enquiries and without making any verification, as was required to be made, under provision of section 68 of the Act, before allowing said claim of introduction of share capital during Ay 2009-10 under consideration. It is this grave mistake committed by AO which has given rise to assessment order passed for Ay 2009-10 on 28.03.2011, liable to be held as an erroneous order. Because of that erroneous order passed by the AO, the exchequer is losing its otherwise tax dues from the assessee which then is resulting into said erroneous order to be prejudicial to the interest of revenue as well.” 16. The Ld. Pr. CIT was also of the opinion that the amendment inserted in section 263 of the Act w.e.f. 01.06.2015 is applicable i.e Explanation (a) and (b) which raises presumption in the event if an AO who passes an order without making enquiry or verification as it should have been made, such an action is deemed to be erroneous as well as prejudicial to the interest of the revenue. Since according to him, the AO has not made 9 ITA No.205/Kol/2021 Techno Tracom Pvt. Ltd., AY: 2009-10 enquiries during the assessment proceedings dated 28.03.2011 to his satisfaction, the presumption raised in clause (a) and (b) of Explanation (2) of section 263 of the Act is attracted and, therefore, the order of the AO dated 28.03.2011 (original assessment) is erroneous as well as prejudicial to the revenue and so he was pleased to set aside the order of AO and directed the AO to conduct fresh investigation in the share capital and premium collected by the assessee. 17. We note that the main grievance of the assessee which has been raised by the Ld. Counsel is that the Ld. Pr. CIT erred in not looking into the later development which took place in this case i.e. the search assessment u/s. 153A of the Act which culminated in the assessment order u/s. 153A of the Act dated 23.03.2015. According to the Ld. Counsel, the Ld. Pr. CIT ought to have looked into the records which were before him pertaining to the assessee for AY 2009-10. Drawing our attention to the meaning of ‘records’ which has already been reproduced (supra), he contended that the Ld. Pr. CIT ought to have gone through the record of the assessee pertaining to the year (AY 2009-10) which he proposed to revise. According to him, it is clear from the definition given u/s. 263 of the Act regarding ‘records’, the Ld. Pr. CIT while exercising his powers u/s 263 of the Act, ought to have taken into consideration “all records” relating to any proceedings under the Act available “at the time of examination of the Ld. Pr. CIT”. According to the Ld. Counsel, the records of the search assessment pertaining to the assessee for the AY 2009-10 was before the Ld. Pr. CIT and he ought to have looked into the records to see whether the AO albeit during the search assessment has enquired about the identity, creditworthiness and genuineness of the twenty-five (25) share subscribers and pursuant to that being satisfied has not drawn any adverse inference against the assessee as contemplated u/s. 68 of the Act. Therefore, according to the Ld. Counsel, the Ld. Pr. CIT erred in not taking into consideration the enquiry conducted by the AO by issuing notice u/s. 133(6) of the Act to all the twenty-five (25) share subscribers and the replies received by the AO and after verification being satisfied has not made any addition against the assessee should have been considered by the Ld. Pr. CIT while exercising his powers u/s. 263 of the Act, which unfortunately, the Ld. Pr. CIT has ignored which is against the settled principle of law by the Hon’ble Supreme Court in the case of CIT Vs. Shreeman Junathesware Packing Products & Camphor Works 231 ITR 53 (SC) as well as the decision of the Hon’ble Gujarat High court in CIT Vs. Arunben Sumankumar order dated 03.07.2002 reported in 10 ITA No.205/Kol/2021 Techno Tracom Pvt. Ltd., AY: 2009-10 259 ITR 386 (Guj.). The Ld. Counsel brought to our notice the decision of Hon’ble jurisdictional High Court in the case of CIT Vs. S. M. Oil Extraction Pvt. Ltd. (1991) 190 ITR 404 (Cal) wherein the Hon’ble Calcutta High Court taking note of the Explanation to section 263(1) of the Act held that ‘ In our view the record contemplated in section 263(1) does not mean only the order of assessment. The Commissioner is entitled for the purpose of exercising his revisional jurisdiction to look into the whole evidence. The expression “record” as used in section 263 of the Act is comprehensive enough to include the whole record of evidence on which the original assessment order was based. ............The valuation proceedings is a part of the assessment proceeding. But once the valuation report was received by the Income Tax Officer, although subsequent to the completion of the assessment, it forms part of the records of the assessment year in question.” Thereafter, it was further held by the Hon’ble Calcutta High Court that “where any proceeding is initiated in the course of assessment proceeding having a relevant and material bearing on the assessment to be made and the result of such proceedings was not available with the Income Tax Officer before the completion of the assessment but the result came subsequently, the revising authority is entitled to look into the search material as it forms part of the assessment records of the particular assessment year.” Therefore, according to the Ld. Counsel, the action of the Ld. Pr. CIT ignoring the search assessment proceedings wherein the AO had thoroughly enquired about the nature and source of the share capital and premium collected by the assessee from twenty-five (25) share subscribers, is erroneous and being bad in law needs to be struck down. 18. In order to appreciate the aforesaid contention of the assessee, we need to appreciate that the Pr. Commissioner or Commissioner have jurisdiction to exercise his revisional powers if he finds the order of the AO to be erroneous as well as prejudicial to the revenue. We may look at the opening words of section 263 of the Act, which states ‘The Ld. Pr. CIT may call for and examine the record of any proceedings under this Act...’’ And after calling for records of any proceedings, in case if he considers that any order passed therein by the AO is erroneous in so far as it is prejudicial to the interest of the revenue, he may interfere with the order of the AO and has the power to enhance or cancel or modify the order of the AO. Now let us look into the meaning of the ‘records’ which has been inserted by the Finance Act 1988 in section 263 of the Act, and the reason given for bringing out this particular explanation/deeming fiction to word ‘records’ has 11 ITA No.205/Kol/2021 Techno Tracom Pvt. Ltd., AY: 2009-10 been taken note by the Hon’ble Supreme Court while passing the order in Shreeman Junathesware Packing Products & Camphor Works, supra. The Hon’ble Supreme Court noted why the Parliament made the amendment/insertion which is stated in the Memorandum explaining the provisions in the Finance Bill of 1988 and will refer to only that part which is relevant for us. It was observed by the Parliament in the Memorandum that the provision as it stood then, had given rise to judicial controversy in respect of the following: "48. x x x x x x x x x (a) On the interpretation of the term ‘record’ . It has been held in some cases that the word 'record' in section 263 (l) could not mean the record as it stood at the time of examination by the Commissioner but it meant the record as it stood at the time when the order was passed by the Assessing Officer. Such an interpretation is against the legislative intent and defeats the very objective sought to be achieved by such provisions, since the purpose is to revise the order on the basis of the record as is available to the Commissioner at the time of examination. x x x x x x x x x To eliminate litigation and to clarify the legislative intent in respect of the provisions in the three Direct tax Acts, it is proposed to clarify the legal position in this regard the Explanation to the relevant Sections. The proposed amendments are intended to make it clear that 'record' would include all records relating to any proceedings under the concerned direct tax laws available at the time of examination by the commissioner." The relevant part of the explanation after its substitution read as follows: "Explanation.- For the removal of doubts, it is hereby declared that, for the purposes of this sub- section,- (a).......... . (b) "record" includes all records relating to any proceeding under this Act available at the time of examination by the Commissioner; (b)........ " Thus, by this amendment, definition of the term "record" for the purpose of Section 263, was provided by the legislature. But a doubt regarding the meaning of the term 'record' still persisted and, therefore, a further amendment was made by the Legislature while enacting Finance Act of 1989. The Memorandum explaining the provisions in the Finance Bill, 1989 makes that clear. Paragraph 28 of the said Memorandum reads as under: "28. Under the existing provisions of Section 263 of the Income-tax Act and corresponding provisions of the Wealth-tax Act and the Gift-tax Act, the Commissioner of Income-tax is empowered to call for and examine the record of any proceeding and if he considers that he order passed by the Assessing Officer is erroneous in so far as it is prejudicial to the interests of Revenue" he may pass such order thereon as the circumstances of the case justify, including an order enhancing or modifying the assessment, or cancelling the same or directing a fresh assessment. By the Finance Act, 1988, an Explanation was substituted with effect from 1st June, 1988, to the relevant sections of the Income-tax Act, Wealth-tax Act 12 ITA No.205/Kol/2021 Techno Tracom Pvt. Ltd., AY: 2009-10 and Gift-tax Act to clarify that the term "record" would include all records relating to any proceeding available at the time of examination by the Commissioner. Further, it was also clarified that the Commissioner is competent to revise an order of assessment passed by the Assessing Officer on all matters except those which have been considered and decided in an appeal. The above Explanation was incorporated in the Finance Act, 1988, to clarify this legal position to have always been in existence. Some Appellate Authorities have, however, decided that the Explanation will apply only prospectively, i.e. only to those orders which are passed by the Commissioner after 1.6.1988. Such an interpretation is against the legislative intent and it is, therefore, proposed to amend section 263 of the income tax Act, so as to clarify that the provisions of the explanation shall be deemed to have always been in existence. Amendments on the above lines have been proposed in section 25 of the Wealth-tax Act and section 24 of the Gift-tax Act also." After that amendment, the relevant part of the Explanation reads as under: "Explanation.- For the removal of doubts, it is hereby declared that, for the purposes of this sub- section,- (a) ....... (b) “record” shall include and shall be deemed always to have included all records relating to any proceeding under this Act available at the time of examination by the Commissioner.” 19. Thereafter, the Hon’ble Supreme Court in the case of Shreeman Junathesware Packing Products & Camphor Works (supra) has held as under: “The revisional power conferred on the Commissioner under section 263 is of wide amplitude. It enables the Commissioner to make or cause to be made such enquiry as he deems necessary in order to find out if any order passed by the Assessing Officer is erroneous in so far as it is prejudicial to the interests of the Revenue. After examining the record and after making or causing to be made an enquiry, if he considers the order to be erroneous, then he can pass the order thereon as the circumstances of the case justify. Obviously, as a result of the enquiry he may come into possession of new material and he would be entitled to take that new material into account. If the material, which was not available to the Income-tax Officer when he made the assessment could thus be taken into consideration by the Commissioner after holding an enquiry, there is no reason why the material which had already come on record though subsequently to the making of the assessment cannot be taken into consideration by him. Moreover, in view of the clear words used in Clause (b) of the Explanation to Section 263(1), it has to be held that while calling for and examining the record of any proceeding under Section 263(1), it is and it was open to the Commissioner not only to consider the record of that proceeding but also the record relating to that proceeding available to him at the time of examination." 20. The facts of the case of Shreeman Junathesware Packing Products & Camphor Works (supra) was that the assessee during the assessment year 1977-78 had constructed a cinema theatre and in the return filed by it had shown the cost of construction at Rs.20,28,498/-. During the assessment proceedings the AO on 2 nd February, 1980 wrote to 13 ITA No.205/Kol/2021 Techno Tracom Pvt. Ltd., AY: 2009-10 the DVO to ascertain and report correct cost of the construction of the theatre. The Valuation Officer could not give his report by 31.03.1980 by which date the assessment was to be completed. The ITO, therefore, without waiting for this report passed an order accepting the valuation mentioned by the assessee in its return. Later on, the Valuation Officer submitted his report on 16.12.1980 and he determined the cost of construction at Rs.34,58,600/- against Rs.20,28,498/- as stated by the assessee. In the light of the valuation report the Ld. Pr. CIT issued notice u/s. 263(1) of the Act on the ground that investment not accounted for the assessee firm should have been brought to tax and since the ITO having not done so, his order was erroneous and prejudicial to the interest of the revenue. Here, the contention of the assessee was that the valuation report did not form part of the record of proceedings, therefore, it could not be a valid basis for initiating an action u/s. 263 of the Act and for that relied on the decision of the Hon’ble Calcutta High Court in the case of Ganga Properties Vs. ITO 118 ITR 447, which was accepted by the Tribunal, and the order of the Ld. Pr. CIT u/s. 263 of the Act was set aside. On appeal by the revenue before the Hon’ble High Court the question of law (infra) was answered in favour of the assessee and the question of law framed was as under: “Whether, on the facts and in the circumstances of the case, the Appellate Tribunal was right in law in holding that the word “record” used in section 263(1) of the Act would not mean the record as it stands at the time of examination by the Commissioner, but it means the record as it stands at the time the order in question was passed by the ITO?” 21. Since the Hon’ble Calcutta High Court has upheld the order of the Tribunal reversing the action of the Ld. Pr. CIT, the revenue preferred an appeal before the Hon’ble Supreme Court and the Hon’ble Supreme Court has held in favour of Revenue by holding that that “We, therefore, hold that it was open to the Commissioner to take into consideration all the records available at the time of examination by him and thus to consider the valuation report submitted by the Departmental Valuation Cell subsequent to the passing of the assessment order and, so the order passed by him was illegal. The High Court was wrong in taking a contrary view. We, therefore, allow this appeal, set aside the judgment, and order passed by the High Court and answer the question referred to the High Court in the negative i.e. in favour of the revenue and against the assessee. In view of the facts and circumstances of the case there shall be no order as to cost.” 14 ITA No.205/Kol/2021 Techno Tracom Pvt. Ltd., AY: 2009-10 22. So in the light of the aforesaid ratio of the decision made by the Hon’ble Supreme Court after considering the meaning of ‘records’ which has been answered in the light of the Explanation (1) inserted by the Finance Act, 1988, which state that record shall include and shall be deemed always to have been included all records relating to any proceedings under this Act available at the time of examination by the Ld. Pr. CIT or Commissioner. In the light of the aforesaid meaning given in the statute, the Ld. Pr. CIT while calling for and examining the record of any proceeding under this Act was duty bound to look into the records available at the time of examination of the Ld. Pr. CIT. In the instant case, it is undisputed that the Ld. Pr. CIT while exercising his revisional jurisdiction after the direction of the Tribunal dated 01.10.2019 read with order dated 22.01.2020 had passed the impugned order dated 30.03.2011 wherein he has taken into consideration the order passed by the Tribunal dated 01.10.2019 and 22.01.2020. Before the Ld. Pr. CIT the assessee had brought to his notice about the search which happened in the assessee’s premises on 18.02.2013 and about the enquiry conducted by the AO, Central Circle in respect of the nature and source of the share capital/premium collected from twenty five (25) subscribers before passing the order u/s. 153A of the Act dated 23.03.2015. The Ld. Pr. CIT while passing the impugned order has taken a narrow view by ludicrously stating that the Tribunal had set aside the order of the AO dated 28.03.2011 and not that of the AO dated 23.03.2015 and, therefore, he was of the opinion that the order passed by the AO u/s. 153A of the Act dated 23.03.2015 for AY 2009-10 was immaterial and irrelevant which view of Ld Pr CIT according to us is ex-facie wrong in the light of the deeming fiction/explanation given for records u/s 263 of the Act. It has been brought to our notice that the AO before framing the assessment order u/s. 153A of the Act dated 23.03.2015 had made enquiry into the share capital and premium collected by the assessee during the relevant assessment year (AY 2009-10). Before us the assessee had filed paper book consists of 125 pages and a perusal of which we note that the AO during the re-assessment proceedings u/s. 153A of the Act has asked the assessee to file about the ‘nature and source’ of the share capital and premium collected by the assessee during the relevant assessment year. Pursuant to the notice u/s. 142(1) of the Act dated 11.11.2014, placed at pages 67 to 68 of the paper book. The assessee had filed the details of shares allotted and documents filed before the ROC as well as the bank statement including the bank book filed. It is noted that after the assessee having filed the details of 15 ITA No.205/Kol/2021 Techno Tracom Pvt. Ltd., AY: 2009-10 the twenty five (25) share subscribers, the AO had issued notice u/s. 133(6) of the Act to all the shareholders in order to examine their respective identity, creditworthiness and genuineness which is available from page nos. 72 to 94 of the paper book. It is also noted that all the share subscribers have directly replied to the AO [Central Circle] pursuant to the notice u/s. 133(6) of the Act which are available from pages 95 to 119 of the paper book. Thus it is seen that the AO had in fact enquired about the nature and source of the share subscribers which all had contributed to the share capital of the assessee. It is also noted that the AO while passing the order dated 23.03.2015 u/s. 153A/143(3) which is available at pages 16 to 20 of paper book has not drawn any adverse inference against the share capital/premium collected by the assessee during the year under consideration. It should be borne in mind that as per the law for AY 2009-10, if there is any credit appearing in the books of the assessee, and section 68 of the Act is attracted, then the initial burden is on the assessee to prove the ‘nature and source’ of it and in this case the assessee on enquiry by AO albeit [in the second round] had filed the documents pertaining to twenty five (25) share subscribers and the AO had verified the veracity of the same by issuing notice u/s. 133(6) of the Act to all the share subscribers and after verification has accepted the share capital and premium of the assessee. In the light of the aforesaid action taken by the AO albeit during the search assessment proceedings dated 23.03.2015, it cannot be said that the AO has not enquired about the nature and source of the share capital and premium collected by the assessee. Here it has to be taken note that under section 263 of the Act, the Ld. Pr. CIT has to examine all the records pertaining to the assessment year at the time of examination by him, which includes in this case the post- search assessment proceedings dated 23.03.2015 and thereafter only if he finds that the order passed by the AO on any issue is erroneous in so far as it is prejudicial to the interest of the revenue, then only he may interfere by enhancing/modifying/cancelling the assessment order. 23. It is interesting to take note as a matter of fact that in the case laws cited supra, the assessee’s contention in those cases were that while exercising revisional jurisdiction u/s 263 of the Act, the Ld. Pr. CIT should not look into the new facts/ records which came in to existence subsequently after the assessment order has been framed by the AO; and in other words, according to those assesses, based on the new facts which came in to existence [in the record] after an AO has framed the assessment order, cannot be a 16 ITA No.205/Kol/2021 Techno Tracom Pvt. Ltd., AY: 2009-10 ground/reason to hold the action of the AO to have framed the assessment to be held/found as erroneous as well as prejudicial to the revenue by the Ld. Pr. CIT while exercising jurisdiction u/s 263 of the Act. However, in the case in hand, it is other way round i.e. the assessee is pleading before the Ld. Pr. CIT to look into the records at the time when he exercises the revisional jurisdiction u/s 263 of the Act wherein enquiries had been conducted by the AO during the search assessment proceedings in the year 2015. In this scenario, we may note that in the case before the Hon’ble Supreme Court Shreeman Junathesware Packing Products & Camphor Works, supra the revenue’s contention was that the Ld. Pr. CIT has got the power to look into the subsequent developments which happened after the assessment took place and therefore based on the subsequent events/records which came to his notice at the time of revisional proceedings empowered him to interfere, which stand/contention/action of Ld PCIT was accepted by the Hon’ble Apex Court. However, in the instant case, the assessee pleads that the subsequent events/enquiry conducted by the AO in the year 2015 on the issue of share capital and premium, [which issue has been found fault by the Ld. Pr. CIT in respect of the assessment order dated 28.03.2011 by passing the impugned order], should be looked in to at the time of exercising revisional jurisdiction is legally tenable and the Ld PCIT ought not to have passed the impugned order without looking in to the subsequent enquiry conducted by the AO on this issue [share capital and premium] in 2015 and consequently the Ld PCIT erred in ignoring the records which contained the enquiry conducted by AO in the year 2015. And therefore the omission on the part of Ld PCIT to ignore the enquiry carried out by the AO [AO, Central Circle] in respect of share capital and premium collected by the assessee, vitiates his impugned action of finding fault with the action of AO [even in respect of the original assessment] on account of lack of enquiry on the part of the earlier AO in respect of share capital/premium. According to us, in the facts and circumstances discussed supra, it does not lie in the mouth of the revenue/Ld PCIT in this case to turn around and say that only the assessment record pertaining to the original assessment order passed dated 28.03.2011 will be only looked into while exercising the jurisdiction u/s. 263 of the Act and not the subsequent event of re-assessment in 2015 which forms part and parcel of assessment records at the time when the Ld PCIT was passing the impugned order in the year 2021. According to us, the revenue cannot blow hot and cold at the same time as seen in other cases decided in their (revenue) favor. Since their plea in other cases (supra) were 17 ITA No.205/Kol/2021 Techno Tracom Pvt. Ltd., AY: 2009-10 that the subsequent events/development also need to taken into consideration while the Ld. Pr. CIT exercised his jurisdiction u/s. 263 of the Act, by applying the same standard in the case in hand the Ld. Pr. CIT ought to have looked into the subsequent enquiries conducted by the AO albeit u/s. 153A of the Act and examined as to whether there was enquiry conducted by the AO in 2015 in respect of the nature and source of the share capital and premium collected by the assessee for AY 2009-10. Here in this case the Ld. Pr. CIT ignored to look into the subsequent action carried out by the AO in the case of assessee’s assessment for AY 2009-10 which is an ‘omission’ on his part which is erroneous/illegal because as per the definition given for records [u/s 263 of the Act], even the subsequent assessment proceeding u/s. 153A is deemed to always to have been included in the assessment records for AY 2009-10, which at the time of examination by him u/s 263 of the Act, he was duty bound to examine. And if the Ld PCIT had examined the assessment folder for AY 2009-10, which would have definitely thrown light in respect of enquires conducted by the AO on the issue of share capital/premium. Therefore, the Ld. Pr. CIT erred in not looking into the records pertaining to the 153A proceeding (post-search) and thereby he ignored the relevant material (enquiry conducted by AO, Central Circle) to hold the action of the AO in original assessment to be erroneous as well as prejudicial to the interest of revenue. In the facts and circumstances of the case discussed, the order of Ld. Pr. CIT cannot be sustained and therefore, quashed. 24. In the result, the appeal of the assessee is allowed. Order is pronounced in the open court on 18th April, 2022. Sd/- Sd/- (Rajesh Kumar) (Aby. T. Varkey) Accountant Member Judicial Member Dated: 18.04.2022 JD, Sr. PS Copy of the order forwarded to: 1. Appellant– M/s. Techno Tracom Pvt. Ltd., 4 th floor, Room No. 417, Kamalalaya Centre, 156A, Lenin Sarani, Kolkata-700 013. 2. Respondent– ACIT, Central Circle-1(2), Kolkata. 3. Pr. CIT, Central-1, Kolkata. 4. DR, ITAT, Kolkata, (sent through e-mail).. True Copy By Order Assistant Registrar ITAT, Kolkata Bench, Kolkata