WELLKNOWN TECHNOLOGIES PRIVATE LIMITED, MUMBAI V. PRINCIPAL COMMISSIONER OF INCOME TAX - CENTRAL - 4, MUMBAI

ITA 2912/MUM/2018

• Counselvise Citation: [2018] 119 COUNSELVISE.COM (IT) 0853 (ITAT-MUMBAI)
• Duration Of Justice: 6 month(s) 27 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 03-12-2018
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: G
• Assessment Year: 2009-2010
• Appeal Filed On: 07-05-2018
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: ABHIJIT PATANKAR
• Keywords: Bogus purchase; Bogus Share capital; Capital asset; Revision of order; Depreciation; Search and seizure; Principle of natural justice; Assessment record; Onus to prove; Capital expenditure
• Section: 143(3); 142(1); 153A; 115JB; 80IB; 263; 92

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL G BENCH, MUMBAI BEFORE SHRI SHAMIM YAHYA, AM AND SHRI PAWAN SINGH , JM ITA NO S . 2912 , 2913, 2914, 2915/MUM/2018 (ASSESSMENT YEAR: 2009 - 10 , 2010 - 11, 2012 - 13, 2013 - 14) M/S. WELLKNOWN TECHNOLOGIES PVT. LTD. B - WING, 14 TH FLOOR, NIRMAL, 241/242, BACKBAY RECLAMATION, NARIMAN POINT, MUMBAI - 400 021 VS. PR. CIT (CENTRAL) - 4, MUMBAI PAN/GIR NO. AAECM 3469 J ( APPELLANT ) : ( RESPONDENT ) ITA NOS.2916 & 2917/ MUM/2018 (ASSESSMENT YEAR: 2013 - 14) M/S. WELLKNOWN ENTERPRISES PVT. LTD. (ASHTAVINYAK AGROFARMS PRIVATE LIMITED) 145 - C, SANGAM, 4 TH FLOOR, DR. VIGAS STREET, KALBADEVI, MUMBAI - 400 002 VS. PR. CIT (CENTRAL) - 4, MUMBAI PAN/GIR NO. AAHCA 2972 L ( APPELLANT ) : ( RESPONDENT ) ITA NOS.2920 TO 2924 /MUM/2018 (ASSESSMENT YEAR: 2009 - 10 TO 2013 - 14 ) M/S. WELLKNOWN TEXTILE INDUSTRIES PVT. LTD. DR. VIEGAS STREET, KALBADEVI ROAD, MUMBAI - 400 002 VS. PR. CIT (CENTRAL) - 4, MUMBAI PAN/GIR NO. AAACW 0552 A ( APPELLANT ) : ( RESPONDENT ) & ITA NOS.2893 TO 2898 /MUM/2018 (ASSESSMENT YEAR: 2009 - 10 TO 2014 - 15 ) M/S. WELLKNOWN POLYESTERS LIMITED 14 TH FLOOR, B WING, NIRMAL, VS. PR. CIT (CENTRAL) - 4, MUMBAI 2 ITA NO. 2912 /M/2018 & OTHERS 241/242, BACKBAY RECLAMATION, NARIMAN POINT, MUMBAI - 400 021 PAN/GIR NO. AAACW 1018 K ( APPELLANT ) : ( RESPONDENT ) APPELLANT BY : SHRI RAKESH JOSHI RESPONDENT BY : SHRI ABHIJIT PATANKAR DATE OF HEARING : 06.09.2018 DATE OF PRONOUNCEMENT : 0 3 . 1 2 .2018 O R D E R PER BENCH : TH ESE ARE APPEAL S BY FOUR ASSESSEE WHO BELONG TO THE SAME GROUP AGAINST THE ORDER OF THE PRINCIPAL COMMISSIONER OF INCOME TAX , MUMBAI (LD.CIT FOR SHORT) PASSED U/S. 263 OF THE INCOME TAX ACT, 1961 (THE ACT FOR SHORT) FOR DIFFERENT ASSESSMENT YEAR S (A.Y. FOR SHORT ) . 2. SINCE THE ISSUES AR E CONNECTED AND THE APPEALS WERE HEARD TOGETHER THESE HAVE BEEN CONSOLIDATED AND DISPOSED OF TOGETHER FOR THE SAKE OF CONVENIENCE. 3. THE COMMON G ROUNDS OF APPEAL RAISED IN THIS REGARD READ AS UNDER: 1) THE LEARNED PCIT HAS ERRED IN LAW AS WELL AS ON FAC TS WHILE PASSING REVISION ORDER U/S.263 OF THE INCOME TAX ACT, 1961 FOR THE ASSESSMENT ORDER U/S. 143(3) OF THE INCOME TAX ACT, 1961 PASSED BY THE LEARNED ASSESSING OFFICER AFTER MAKING ADEQUATE ENQUIRIES AND APPLICATION OF MIND. 2) THE LEARNED PCIT HAS E RRED IN LAW AS WELL AS ON FACTS WHILE CONSIDERING THE ORDER PASSED BY THE LEARNED ASSESSING OFFICER U/S. 143(3) OF THE INCOME TAX ACT, 1961 AS ERRONEOUS AND PREJUDICIAL TO THE INTEREST OF THE REVENUE, WITHOUT APPRECIATING THE FACTS AND CIRCUMSTANCES OF THE CASE. 3) IN THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE AND IN LAW, THE LD. PCIT HAS ERRED IN EXERCISING HIS REVISIONARY POWERS U/S.263 OF THE INCOME TAX ACT, 1961, IN RELATION TO COMPLETED ASSESSMENT MADE U/S.143(3) DESPITE THE FACT THAT THE SAME WAS DULY 3 ITA NO. 2912 /M/2018 & OTHERS APPROVED BY ADDL. COMMISSIONER OF INCOME TAX U/S.153 A OF THE INCOME TAX ACT, 1961. 4) IN THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE AND IN LAW, THE LD. PCIT HAS ERRED IN EXERCISING HIS REVISIONARY POWERS U/S.263 OF THE INCOME TAX ACT, 1961 WITHOUT APPRECIATING THE FACT THAT THE ORDER WHICH IS SUBJECT MATTER OF REVISION, ITSELF IS NULLITY IN LAW, HENCE ANY FURTHER PROCEEDINGS THEREON CANNOT BE A VALID PROCEEDINGS. 5) ON THE FACTS AND THE CIRCUMSTANCES OF THE CASE AND IN LAW, THE LEARNED PCIT ERRED IN PASSING ORDER UNDER SECTION 263 OF THE INCOME TAX ACT, 1961 IN VIOLATION OF THE PRINCIPLE OF NATURAL JUSTICE BY PASSING ORDER U/S 263 OF THE INCOME TAX ACT, 1961, ON THE ISSUES WHICH WERE NOT PART OF SHOW CAUSE NOTICE. 6) THE LEARNED PCIT HAS ERRED IN LAW AS WELL AS ON FACTS WHILE PASSING ORDER U/S 263 OF THE INCOME TAX ACT, 1961 ON THE PLEA THAT THERE IS NO NEXUS BETW EEN THE CAPITAL ASSETS PURCHASES AND SHARE CAPITAL INTRODUCTION WITHOUT POINTING OUT ANY DEFECT IN THE RECONCILIATION SUBMITTED BEFORE THE AO AS WELL AS BEFORE INVESTIGATION WING BASED ON WHICH ORDER U/S 143(3) R.W.S. 153A OF THE INCOME TAX ACT, 1961 WAS PASSED. TWO FURTHER GROUNDS IN THE CASE OF M/S. WELLKNOWN POLYESTERS LIMITED READS AS UNDER: 1 ) THE LEARNED PCIT HAS ERRED IN LAW AS WELL AS ON FACTS WHILE HOLDING THAT THE APPELLANT HAS NOT PROVIDED ANY DETAILS OF DEPRECIATION DISALLOWED IN THE COMPUTATION WITHOUT CONSIDERING THE DETAILS AVAILABLE ON RECORD. 2 ) THE LEARNED PCIT HAS ERRED IN LAW AS WELL AS ON FACTS WHILE HOLDING THAT DEPRECIATION DISALLOWED BY THE APPELLANT SHOULD ALSO BE CONSIDERED WHILE COMPUTING BOOK PROFIT U/S 115JB OF THE INCOME TAX ACT, 1961, WITHOUT CONSIDERING PROVISIONS OF LAW. ONE FURTHER GROUND IN THE CASE OF M/S. WELLKNOWN TECHNOLOGIES READS AS UNDER: 1 ) THE LEARNED PCIT HAS ERRED IN LAW AS WELL AS ON FACTS WHILE PASSING ORDER U/S. 263 OF THE INCOME TAX ACT, 1961 WITHOUT CONSIDERING THE FACT THAT THE ISSUE OF SHARE CAPITAL HAS ALREADY BEING APPROVED BY THE ORDER OF HONBLE ITAT IN THE CASE OF M/S. WEL LKNOWN TECHNOLOGY PVT. LTD. FOR A.Y. 2009 - 10. 4. IN ALL THESE CASES ASSESSMENTS WAS ORIGINALLY COMPLETED U/S. 143 OF THE ACT. IN SUCH ASSESSMENT IN THE CASE OF M/S. WELLKNOWN TECHNOLOGIES SOME ADDITIONS WERE MADE ON ACCOUNT OF UNEXPLAINED SHARE CAPITAL. THE ADDITION WAS DELETED BY THE LD. CIT(A). THIS WAS CONFIRMED BY THE ITAT. SUBSEQUENTLY, THERE WAS SEARCH AND SEIZURE OPERATION AND THE ASSESSMENTS WERE FRAMED U/S. 153A OF THE ACT. 5. IN THE CASE OF M/S.WELLKNOWN POLYESTERS LIMITED, IT WAS FOUND IN THE SEARCH PROCEEDING THAT THE ASSESSEE HAS ISSUED PREFERENCE SHARES TO SHELL COMPANIES AT A HIGH PREMIUM. 4 ITA NO. 2912 /M/2018 & OTHERS M/S.WELLKNOWN POLYESTERS LIMITED FOR THIS ISSUE HAD DEBITED CERTAIN PURCHASE UNDER THE HEAD CAPITAL EXPENSES IN ITS BOOKS OF ACCOUNT AND FURTHER THE SAME HAD BEEN CERTAIN PURCHASE UNDER THE HEAD CAPITAL EXPENSES IN ITS BOOKS OF ACCOUNT AND FURTHER THE SAME HAD BEEN BROUGHT BACK INTO THE ACCOUNTS THE SAID COMPANY IN THE FORM OF PREFERENCE SHARE CAPITAL A FTER ROUTING THROUGH VARIOUS SISTER CONCERN. THIS MODUS OPERANDI WAS NOTED BY THE A.O. IN THE CASE OF M/S. WELLKNOWN POLYESTERS LIMITED BY THE FOLLOWING GRAPHIC CHART: 6 . THE A.O. ALSO NOTED THAT THE PARTY WISE BREAK UP OF PURCHASE FROM SHELL COMPANIES WHICH WAS PLACED AS ANNEXURE I. THIS RUN INTO TWO PAGES AND CONTAIN LIST OF 68 COMPANIES TH ROUGH WHOM BOGUS CAPITAL EXPENDITURE WERE BOOKED. THE SAME READS AS UNDER: 5 ITA NO. 2912 /M/2018 & OTHERS ANNEXURE - I 6 ITA NO. 2912 /M/2018 & OTHERS GRAND TOTAL 348,111,365 438,282,217 45,374,000 317,132,777 531,859,857 203,134,172 1,883,894,388 7 ITA NO. 2912 /M/2018 & OTHERS 7. THE A.O. NOTED THAT THE PURCHASE OF RS.18 , 88 , 38 , 94 , 388/ - HAVE BEEN ACCEPTED AS NON GENUINE BY SHRI ANIL GUPTA OF M/S. WELLKNOWN GROUP OF COMPANY AND THE SAME HAVE BEEN RECORDED IN HIS STATEMENT U/S. 132(4). THE A.O. FURTHER NOTED THAT THE ONLY IMPACT THAT THE BOOKING OF THE ABOVE MENTIONED CAPITAL EXPENDITURE IN THE BOOKS OF ACCOUNTS OF M/S. WELLKNOWN POLYESTERS LIMITED HAS ON THE TAXABILITY OF PROFIT ON THE COAMPNY IS THAT THE DEPRECIATION CLAIMED IN THE PROFIT AND LOSS ACCOUNT ON THE ABOVE PURCHASE MADE. THE YEAR - WISE DATA OF DEPRECIATION CLAIMED AS PER THE PROVISION OF ACT AND DISALLOWED IN THE ORIGINAL RETURN/ RETURN OF INCOME FILED U/S. 153 OF THE ACT WERE NOTED AS UNDER: FINANCIAL YEAR PURCHASE AMOUNT (RS.) TOTAL DEPRECIATION DISALLOWED (RS.) 2008 - 09 348,111,365/ - 17,547,967/ - 2009 - 10 438,282,217/ - 85,672,834/ - 2010 - 11 45;374,000/ - 62,355,635/ - 2011 - 12 317,132,777/ - 74,903,680/ - 2012 - 13 531,859,857/ - 189,144,475/ - 201 3 - L4 203,134,172/ - 156,107,788 / - TOTAL 1,883,894,388/ - 5 8 5,732,379/ - 8 . THE A.O. HAS CONCLUDED IN THIS REGARD AS UNDER: 3.5 THE ABOVE MENTIONED DEPRECIATION HAS BEEN REVERSED IN THE BOOKS OF ACCOUNTS OF THE ASSESSEE AND THE SAME HAS BEEN OFFERED TO TAX IN THE RETURN OF INCOME FILED U/S. 153A OF THE INCOME TAX ACT, 1961 IN THEIR RESPECTIVE ASSESSMENT YEARS AND TAX ON THE SAM E HAS BEEN DUTY PAID BY THE ASSESSEE THE ENTITLES FROM WHICH THE SAME HAS COME AND INTO WHICH THE FUNDS HAVE COME BACK IN FORM OF SHARE CAPITAL BY DEBITING CAPITAL EXPENSES INCURRED OR BEING PLACED IN ANNEXURE - II. DURING THE ASSESSMENT YEAR, THE CAP - EX PUR CHASES OF RS.203,134,172/ - WAS MADE AND THE EXCESS DEPRECIATION OR RS.156,107,788/ - HAS BEEN WITHDRAWN BY THE ASSESSEE. HENCE, NO ADDITION MADE IN THIS REGARD . PENALTY PROCEEDINGS U/ S. 271AAB I S SEPARATELY INITIATED FOR UNDISCLOSED INCOME UNEARTHED AS A RES ULT OF SEARCH ACTION. 9. THE ABOVE ANNEXURE II DETAILED THE INTRODUCTION OF THE BOGUS SHARE CAPITAL IN IDENTIFIED GROUP COMPANIES AFTER IDEN TIFYING CORPORATE ENTITIES GIVING THE AMOUNT AND DATE THEREOF . T HE SAME I S AS UNDER : 8 ITA NO. 2912 /M/2018 & OTHERS ANNEXURE II 9 ITA NO. 2912 /M/2018 & OTHERS 10 ITA NO. 2912 /M/2018 & OTHERS 11 ITA NO. 2912 /M/2018 & OTHERS 12 ITA NO. 2912 /M/2018 & OTHERS 13 ITA NO. 2912 /M/2018 & OTHERS 14 ITA NO. 2912 /M/2018 & OTHERS HENCE, IN THE AFORE - SAID BACKGROUND, THE A. O. HELD THAT NO ADDITION IN THIS REGARD IS FURTHER CONSIDERED. HE MADE SOME ADDITION WITH RESPECT TO THE DISALLOWANCE U/S.14A, THE PROVISION FOR REDEMPTION OF PREFERENCE SHARES U/S.115JB, INTEREST INCOME ON FDR NO T QUALIFIED FOR SECTION 80IB. THE LD. CIT GRANTED PART RELIEF INCLUDING ON THE BASIS THAT NO ADDITION U/S. 153A IS P ERMISSIBLE, DE HORS ANY INCRIMINATING MATERIAL FOUND DURING SEARCH. THE MATTER TRAVELLED TO THE ITAT. THE ITAT VIDE ORDER DATED 13.06.2018 G RANTED PART RELIEF INCLUDING THE DELETION OF THE ADDITION U/S.14A ON THE GROUND THAT IN THE CASE OF 15 ITA NO. 2912 /M/2018 & OTHERS ASSESSMENT U/S. 153A, NO ADDITION U/S. 153A IS PERMISSIBLE DE HORS COGENT MATERIAL FOUND DURING SEARCH. THE ITAT INTER ALIA PLACED RELIANCE UPON THE DECISION OF HON'BLE BOMBAY HIGH COURT IN THE CASE OF CIT VS. CONTINENTAL WAREHOUSING CORPORATION (NHAVA SHEVA) LTD. [2015] 374 ITR 645 (BOM). 10 . NOW THE LD. CIT HAS PASSED AN ORDER U/S. 263 IN ALL THESE CASES. THE LD. CIT IN H IS ORDER U/S. 263 IN THE CASE OF M/S. WELLKNOWN POLYESTERS LIMITED REFERRED TO THE FOLLOWING SHOW CAUSE NOTICE: 2. ON EXA MINATION OF RECORDS FOR AYS 2008 - 09 TO 2014 - 15, IT IS NOTICED THAT THE ASSESSMENT PROCEEDINGS WERE COMPLETED U/S 143(3) R.W.S 15 3A OF THE IT ACT AND TOTED INCOME WA S DETER MIN ED AS DETAILED IN TABLE - 1 BELOW. TABLE - 1: SR. NO. AY RETURN INCOME TOTAL INCOME AS PER NORMAL PROVISIONS BOOK PROFIT AS PER SEC. 115JB DATE OF ASSESSMENT ORDER. 1 2008 - 09 9,55,12,959 10,53,38,240 28,05,47,760 01.04.2015 2 2009 - 10 10,53,02,775 12,05,32,370 38,91,38,939 01.04 .2015 3 2010 - 11 5,08,37,260 8,11,26,800 60,61,33,059 01.04.2015 4 2011 - 12 58,87,97,290 68,81,29,140 147,17,80,000 01.04.2015 5 2012 - 13 80,65,56,300 94,82,24,640 147,59,73,822 01.04.2015 6 2013 - 14 7,98,48,360 8,15,78,960 177,99,67,255 01. 0 4.201 5 7 2014 - 15 48,58,09,456 48,58,18,270 244,83,34,499 01.04.2015 C ONTD .. 3.3 THE IMPORTANT POINT WHICH IS TO BE NOTED THAT ADMITTEDLY THE FUNDS OF COMPANY WE LL KNOWN POLYESTERS LTD. WERE SIPHONED OUT BY DEBITING BOGUS PURCHASE BILLS [ CAPITAL EXPENDITURE B ILL S ON ACCOUNT OF PURCHASES OF BOGUS ASSETS/ AND IN TURN THAT AMOUNT WA S ROUTED THROUGH VARIOUS SHE LL COMPANIES AND INTRODUCED INTO THE GROUP CONCERNS OF WE LL KNOWN GROUP [VIZ. WE LL KNOWN TECHNOLOGIES PVT LTD, WE LL KNOWN TEXTILE INDUSTRIES PUT LTD, T BR A DMA LOGISTICS PARKS PVT LTD,, ASHTAVINAYAK AGRO FARMS PUT LTD., NISHITA INFRASTRUCTURE PUT LTD., ETC.] IN THE FARM OF PREFERENCE SHARES [WITH HUGE PREMIUM/ /SHARE A PPLICATION MONEY AND THEN THE FUNDS WERE BR OUGHT BACK IN THE BOOKS OF WELLK NOWN POLYESTERS PUT LTD, BY SUBSCRIBING PREFERENCE SHARES WITH PREMIUM TO ITS GROUP CONCERNS. THEREFORE, SUCH PREFERENCE SHARES SHOWN IN THE BOOKS OF ACCOUNTS OF WELLKNOWN POLYESTER S PVT. LID. AND ITS SISTER CONCERNS ARE ITSELF BOGUS A ND NOT AT AFT PAYABLE IN REAL SENSE TO ANY OF THOSE SHE LL COMPANIES...... 3.4 IT IS FURTHER NOTED THAT EVEN AFTER WITHDRAWING THE DEPRECIATION ON THE BOGUS ASSETS, THE COMPANY WE LL KNOWN POLYESTERS PVT L TD. DID NOT REDUCE THE CORRESPONDING DEPRECIATION AS PER COMPANY'S ACT FOR THE PURPOSES OF COMPUTATION OF BOOK PROF IT U/ S. 11 5 JB; AND THE AO ALSO HAD NOT MADE ANY DISALLOWANCE ON THAT ACCOUNT WHILE COMPUTING BOOK PROFIT TO THAT EXTENT, THE ASSESSMENT ORDER MADE BY THE ASSESSING OFFICER IS ERRONEOUS AND PREJUDICIAL TO THE INTEREST OF THE REVENUE. 4. IN VIEW OF THE FACTS AS DISCUSSED HEREIN ABOVE, IT IS CLEAR THAT IN THE CASE OF PRESENT ASSESSEE F WE LL KNOWN POLYESTERS PVT LTD] THERE IS A FAILURE ON THE PART O F THE ASSESSING OFFICER TO MAKE DUE EXAMINATION OF THE ISSUE OF DISALLOWANCE OF CLAIM OF DEPRECIATION [AS PER COMPANIES ACT] ON PURCHASE OF BOGUS ASSETS WHILE COMPUTING THE BOOK PROFIT U/S. 16 ITA NO. 2912 /M/2018 & OTHERS 11 5 JB AND THAT HAS RENDERED THE ASSESSMENT ORDERS PASSED U/S 143(3 ) R.W.S 153A OF THE JT ACT FOR A.Y. 2008 - 09 TO 2014 - 15 FAS REFERRED IN TABLE 1 ABOVE ] ERRONEOUS, IN SO FAR AS IT IS PREJUDICIAL TO THE INTERESTS OF REVENUE, IN TERMS OF SECTION 263 OF THE IT ACT. 11 . THEREAFTER THE LD. CIT(A) NOTED THAT COMPLIANCE OF TH E ASSESSEE AS UNDER: 4. IN COMPLIANCE TO THE SHOW - CAUSE NOTICE SHRI SUNIL SHAH AND SHRI RAKESH JOSHI, C.AS., AUTHORIZED REPRESENTATIVES OF THE ASSESSEE APPEARED AND FILED WRITTEN SUBMISSIONS DATED 16/08/2017. CASE WAS ALSO HEARD ON SUBSEQUENT DATES BY NE W INCUMBANTS. THE MAIN CONTENTION RAISED BY THE ASSESSEE IN THE SAID REPLY IS THAT THE BASE FIGURE FOR THE COMPUTATION OF OF TAX LIABILITY IS THE BOOK PROFIT COMPUTED U/S.115JB OF THE INCOME TAX ACT, 1961, IN ACCORDANCE WITH THE PROVISIONS OF PARTS N AND III OF SCHEDULE VI TO THE COMPANIES ACT AND THE ASSESSING OFFICER HAS VERY LIMITED SCOPE TO TINKER WITH THE AUDITED BOOKS OF ACCOUNT AS HELD BY THE APEX COURT IN CASE OF APOLLO TYRES TTD. V/S. CIT (255 ITR 273)(SC) AND SUBSEQUENT JUDGMENTS THAT FOLLOWED I .E. MALAYALA MANORAMA CO.LTD. VS. CIT(300 ITR 251)(SC), KINETIC MOTAR CO. LTD. VS. DCIT (262 ITR 330) ( BOM) , CIT VS. ADBHUT TRADING CO.PVT.LTD. {338 FTR 940)(BOM), CLTVS. ECHJAY FORGING PVT. LTD. (251 ITR 15)(BOM ) , CIT VS. KOVAI MAR UTHI PAPER & BOARD (P) LT D. (294 ITR 57) (MADRAS). THE A.RS. HAVE ALSO CITED VARIOUS CASE LAWS TO CONTEND THAT THE A.O. HAS APPLIED HIS MIND, WHILE WORKING BOOK PROFIT U/S, 11 5 JB OF THE ACT AND THEREFORE, THE SAID ORDERS CANNOT BE CALLED AS ERRONEOUS AND HENCE CANNOT BE REVISED ME RELY F O R BEING PREJUDICIAL TO THE INTEREST OF REVENUE AS HELD BY THE APEX - COURT IN THE CASE OF MALABAR INDUSTRIAL CO. LT D. VS. CIT (243ITO 5 3) (SC). 1 2 . CONSIDERING THE SUBMISSIONS, THE LD. CIT(A) NOTED THE INVOLVEMENT OF VARIOUS GROUP COMPANIES. HE NOTED THAT SHRI ANIL GUPTA, THE MANAGING DIRECTOR AND THE OTHER DIRECTORS HAVE ACCEPTED THE FIXED ASSETS PURCHASED AND REINTRODUCTION OF THE SAME IN THE GARB O F BOGUS PREFERENCE SHARE CAPITAL IN THE FORM OF FOLLOWING GROUP COMPANIES. 1) M/S. WELIKNOWN TEXTILE INDUSTRIES PVT. LTD, 2) M/S. WELIKNOWN TECHNOLOGIES PVT. LTD. 3) M/S, ASHTAVINAYAK AGROFARMS PVT. LTD. 4) M/S. BRADMA LOGISTICS PARKS LTD. 5) M/S. NISHITA INFRASTRUCTURE PVT. LTD, 1 3 . THE LD. CIT FURTHER N OTED THAT THE COMPAN IES AT SR. NOS. 3 - 5 WERE ALLEGED LY SH ELL COMPANIES. HE NOTED THE MODUS OPERANDI AS UNDER: 1. FICTI O US CAPEX BILLS DEBITED IN BOOKS OF WELLKNOWN POLYESTER LTD. 2. EQUIVALENT AMOUNT OF CAPEX PURCHASES GIVEN TO SHELL COMPANIES TO INVEST AS SHARE APPLICATION MONEY AT A HIGH PREMIUM ON PAYMENT &R THE CAPEX BILLS BEING REMITTED. 3. SHELL COMPANIES INVEST IN WELLKNOWN GROUP COMPANIES AS MENTIONED ABOVE. 4. FUNDS ARE FINALLY PLOUGHED BACK I NTO M/S WELLKNOWN POLYESTERS LTD, FROM THE SAID WELLKNOWN GROUP COMPANIES. 17 ITA NO. 2912 /M/2018 & OTHERS 1 4 . THEREAFTER, THE LD. CIT NOTED THE ASSESSEE WISE, YEAR WISE AMOUNTS OF SHARE CAPITAL THAT HAVE BEEN ACCEPTED AS HAVING BEEN RECEIVED FROM BOGUS ENTITIES BY THE ASSESSEE GROUP AS UNDER: PARTICULARS 2008 - 09 2009 - 10 2010 - 11 2011 - 13 2013 - 13 2013 - 14 TOTAL WELLKNOWN TEXTILE INDUSTRIES PVT LTD. - 2.00 CR - - 25.00 CR - 27.00 C WELLKNOWN TECHNOLOGY PVT LTD. - 7.50 CR 34.82 CR - 0.50 CR - 42.82 C R BRADMA LOGISTICS PARKS PVT. LTD. 10.95 CR 3.35 CR 0.988 CR - - - 15.28 8 C R ASHTAVINAYAKAGROFARMSPVT LTD - - - - 27.90 CR 4.50 CR 32.40C R NISHITA INFRASTRUCTURE PVT. LTD. - 13.12CR - 42.02 CR - - 55.14 C R TOTAL 10.95 CR 35.97 CR 35.808 CR 43.03 CR 53.40 CR 4.50 CR 172.641C R 1 5 . THEREAFTER THE LD. CIT OBSERVED AS UNDER: (IV) FROM THE ASSESSMENT ORDERS PASSED IN THE CASE OF WELLKNOWN POLYESTERS PVT. LTD, IT IS NOTED THAT THOUGH THE AO HAS TAKEN NOTE OF THE CONFESSED MODUS OPERANDI FOR DEBITING THE BOGUS CAPITAL EXPENSES BILLS AND THEN INTRODUCING BACK THAT MONEY IN THE BOOKS OF THE GROUP CONCERNS OF WELLKNOWN GROUP [VIZ. WELLKNOWN TECHNOLOGIES PVT. LTD, WELLKNOWN TEXTILE INDUSTRIES PVT. LTD., BRADMA LOGISTICS PARKS PVT. LTD., ASHTAVINAYAK AGRO FARMS PVT. LTD., NIAHITA INFRASTRUCTURE PVT. LTD., ETC.] THROUGH VARIOUS S HELL COMPANIES IN THE FORM OF PREFERENCE SHARES (WITH HUGE PREMIUM] /SHARE APPLICATION MONEY; BUT WHILE COMPLETING THE ASSESSMENT OF THIS ASSESSEE COMPANY, THE AO HAS SIMPLY OBTAINED THE LIST OF SUCH SHELL COMPANIES THROUGH WHICH S H ARE APPLICATION MONEY ( WITH PREMIUM] WERE RECEIVED AND/ OR PREFERENCE SHARES WERE ALLOTTED. BUT NO ENQUIRES WERE MADE TO ASCERTAIN AS TO WHETHER THE SOURCE OF SUCH FUND WAS THE INTRODUCTION OF BOGUS PURCHASE BILLS IN THE BOOKS OF WELLKNOWN POLYESTERS PV T. LTD. THE ASSESSEE COMPANY TOO HAD NOT FILED ANY DETAILS PROVING THE NEXUS OF SUCH SHARE CAPITAL/ SNARE APPLICATION MONEY WITH THE SAID BOGUS PURCHASES. IF THAT WAS THE CASE, THE ASSESSEE GROUP OUGHT TO HAVE CORRECTED THE BOOKS OF ACCOUNTS LATER AFTER S EARCH. BUT IT IS NOTED THAT THE [PREFERENTIAL] SHARE CAPITAL STILL REMAINS AS SUCH IN THEIR BOOKS OF ACCOUNTS. IN VIEW OF THESE FACTS, THE AO OUGHT TO HAVE EXAMINED THE TAXABILITY OF SUCH SHARE CAPITAL TOGETHER WITH PREMIUM AND/OR SHARE APPLICATION M ONEY IN THE HANDS OF THE ASSESSEE COMPANY U/S 68 AND / OR SECTION 2(24)(IV) OF THE ACT. THE SHARE CAPITAL IN ASSESSEE'S AND GROUP COMPANIES CONFESSED AS BOGUS HAS NOT BEEN OFFERED AS SUCH FOR TAXATION BY ANY OF THE GROUP CONCERNS INCLUDING ASSESSEE COMPANY . 1 6 . THEREAFTER CONSIDERING THE ASSESSEE REPLY, THE LD. CIT EXAMINED THE ISSUE AND OBSERVED AS UNDER: 7.1.2 (A) THE ASSESSING OFFICER IN THE INSTANT CASE, HAVING NOTICED THAT THE BOGUS DEPRECIATION HAS BEEN DISALLOWED SUO MOTO, WHILE COMPUTING TOTAL INC OME UNDER NORMAL 18 ITA NO. 2912 /M/2018 & OTHERS PROVISIONS OF THE INCOME TAX ACT, 1961, HAS TAKEN A CONTRADICTORY STAND IN ALLOWING THE SAME WHILE COMPUTING BOOK PROFIT UNDER COMPANIES ACT, IGNORING THE SPECIFIC AND STATUTORY MANDATE REQUIRED UNDER EXPLANATION 1 (G)(IIA) TO 115JB OF THE INCOME TAX ACT, 1961. ( B) UNDER THE CIRCUMSTANCES, THE ASSESSING OFFICER IS STATUTORILY OBLIGED TO CARRY OUT ALL THE NECESSARY ENQUIRIES BEFORE THE ASSESSMENT UNDER SECTION 142(1)/142(2) OF THE INCOME TAX ACT, 1961, AND UNDER CERTAIN CIRCUMSTANCES PROVID ED UNDER SUB - SECTION (2A) TO SECTION 142 CAN DIRECT THE ASSESSEE TO GET ITS ACCOUNTS AUDITED BY AN ACCOUNTANT, AND/OR IF CIRCUMSTANCES REQUIRE CAN INVOKE THE PROVISIONS OF SECTION 145 OF THE INCOME TAX ACT, 1961. THE EXPLANATION TO SEC.288(2) OF THE INCOME TAX ACT, 1961, PROVIDES THE DEFINITION OF AN ACCOUNTANT. (C) AT THIS STAGE, THE PROVISION OF SUB - SECTION (2) TO SECTION 145 OF THE INCOME TAX ACT, 1961, CLEARLY MANDATES THAT THE ASSESSEE OUGHT TO FOLLOW THE NOTIFICATIONS OF THE CENTRAL GOVERNMENT NOTIFI ED IN THE OFFICIAL GAZETTE IN RESPECT OF INCOME COMPUTATION AND DISCLOSURE STANDARDS, (D) HAVING NOTICED THAT THE AUDITOR'S REPORT SUBMITTED BY THE ASSESSEE ALONGWITH THE RETURN OF INCOME) IS BLATANTLY FALSE AND UNRELIABLE, THE ASSESSING OFFICER WAS STATU TORILY IJOUND BY EITHER OF THE FOLLOWING STATUTORY PROVISIONS, AS DISCUSSED ABOVE. I. SECTION 142(1) AND 142(2) OF THE INCOME TAX ACT, 1961, TO CARRY OUT SUCH INQUIRY FOR PURPOSE OF OBTAINING FULL INFORMATION IN RESPECT OF INCOME OR LOSS OF THE ASSESSEE, A MD II. DIRECT THE ASSESSEE TO GET ITS ACCOUNTS AUDITED FROM THE ACCOUNTANT U/S 142(2A) OF THE INCOME TAX ACT, 1961, OR III. REJECT THE BOOKS OF ACCOUNTS U/S 145(3) OF THE INCOME TAX ACT, 1961, CONSIDERING THE FACTS OF THE CASE AND PROVISIONS OF LAW. (E) AS IS EVIDENT FROM THE ASSESSMENT RECORDS, THE ASSESSING OFFICER HAS FAILED TO INVOKE ANY OF THE ABOVE MENTIONED PROVISIONS OF THE INCOME TAX ACT, 1961, WHICH ARE PRIMARILY AND STATUTORILY REQUIRED OF HIM IN FRAMING THE ASSESSMENT ORDER, MORE SO IN THE LIGHT OF THE REVELATIONS AND ADMISSIONS BROUGHT OUT DURING THE COUR$E OF SEARCH, THEREBY MAKING THE SAID ASSESSMENT ORDER; DETERMINING THE TOTAL INCOME TINDER NORMAL PROVISIONS OF INCOME TAX ACT, 1961 AND BOOK PROFIT U/S 115JB OF THE INCOME TAX ACT, 1961, ERRON EOUS AND PREJUDICIAL TO THE INTEREST OF REVENUE WITHIN THE MEANING OF THE PROVISIONS OF SECTION 263(1) OF THE INCOME TAX ACT, 1961, 7.1.3 THE BOGUS PREFERENCE SHARE CAPITAL OF RS. 172.648 CR, INTRODUCED WAS NOT EVEN DECLARED AND ADDED AS UNDISCLOSED INCOME IN THE HANDS OF M/S. WELLKNOWN POLYESTER LTD. THEREFORE, THE SHARE CAPITAL REMAINED UNEXPLAINED IN THE HANDS OF M/S. WELLKNOWN POLYESTER LTD. THOUGH THE MODUS OPERANDI OF CIRCUITOUS TRANSACTIONS WAS NARRATED BY THE GROUP DIRECTORS OF THE SAID COMPANIES, THE SAID CIRCUITOUS TRANSACTION* WERE NEVER AT ANY STAGE ANALYSED EITHER BY THE INVESTIGATION WING OR BY THE A.O, OR BY THE ASSESSEE GROUP ON TRANSACTION TO TRANSACTION BASTE TO PROVE THE 'NEXUS' F THE FUNDS SIPH ONED OFF BY M/S, WELLKNOWN POLYESTER LTD. THROUGH CAPEX WITH THE PREFERENTIAL CAPITAL FINALLY INTRODUCED IN M/S. WELLKNOWN POLYESTER LTD. AND THIS WAS THE PRIMARY REASON FOR ADMISSIONS WITHOUT CORRESPONDING ADDITIONS .IN THE HANDS OF M/S. WELLKNOWN POLYEST ER LTD. THE ASSESSEE HAS TAKEN SHELTER BEHIND CERTAIN MODUS OPERANDI DISCLOSED AT THE TIME OF SEARCH IN RESPECT OF CIRCUITOUS TRANSACTIONS WITHOUT DISCHARGING ITS PRIMARY ONUS TO PROVE THE SOURCE OF SHARE CAPITAL INTRODUCED IN ITS BOOKS OF ACCOUNTS IN TERM S OF IDENTITY .CREDIT WORTHINESS OF THE SHAREHOLDERS AND GENUINENESS OF THE TRANSACTIONS BY ACTUALLY PRODUCING RELEVANT CHAIN OF TRANSACTIONS AND FAILURE TO DO SO MAY LEAD TO ADDITION U/S.68OFTHEI.T. ACT. 19 ITA NO. 2912 /M/2018 & OTHERS 7.1.4 LASTLY, WITH REFERENCE TO PARA 5.9 ABOVE, THE ASSESSEE HAS WITHDRAWN THE DEPRECIATION CLAIMED ON THE BOGUS ASSETS IN THE 'STATEMENT OF TOTAL INCOME' AND HAD NOT FURNISHED ANY DETAILS OF ASSETS ON WHICH THE DEPRECIATION HAVE BEEN WITHDRAWN. IN THE A.Y. 2009 - 10 THE ASSESSEE HAS ACCEPTED THE BOGUS PURCH ASES AMOUNTING TO RS. 348,111.365/ - HOWEVER THE DEPRECIATION WITHDRAWN AMOUNTS TO RS, 1,75,47,968/ - WHICH IS APPROXIMATELY 5%. THE ASSESSING OFFICER WITHOUT VERIFYING THE FACT HAD ACCEPTED THE ASSESSEES CLAIM. 1 7 . AFTER ELABORATELY CONSIDERING THE CASE LA WS AND THE PROVISIONS OF SECTION 263, HE CONCLUDED AS UNDER: 8 IT IS CLEAR FROM THE DISCUSSIONS ON FACTS CONTAINED IN THE FOREGOING PARAGRAPHS AND THE ESTABLISHED LEGAL POSITION WHICH ARE BINDING ON SUCH SET OF FACTS, THE ASSESSING OFFICER HAS FAILED TO C ARRY OUT NECESSARY ENQUIRIES AS WARRANTED BY THE FACTS AND CIRCUMSTANCES OF THE CASE, APPLY THE CORRECT PROVISIONS OF THE LAW AS DISCUSSED ABOVE AND THE ASSESSMENTS HAVE BEEN COMPLETED BY ADOPTING UNRELIABLE AND BLATANTLY INCORRECT/UNTRUE ACCOUNTS, AUDITED IN VIOLATION TO SCHEDULE VI OF COMPANIES ACT AND IGNORING THE OVERWHELMING EVIDENCES GATHERED DURING THE COURSE OF SEARCH CARRIED ON 23/05/2013 AND FURTHER REAFFIRMED BY THE STATEMENTS OF VARIOUS RESPONSIBLE PERSONS RECORDED UNDER OATH AT THE TIME OF SEAR CH AND DURING POST SEARCH PROCEEDINGS WHEREIN , IT HAS BEEN CLEARLY ADMITTED THAT CAPITAL ASSETS HAVE BEEN INFLATED BY WAY OF BOGUS CAPITAL EXPENDITURE BY USING THE SH E LL COMPANIES AS CONDUITS. THE ASSESSEE HAS NOT ALSO DISCHARGED PRIMARY ONUS TO PROVE THE SOURCE OF SHARE CAPITAL INTRODUCED IN ITS BOOKS OF ACCOUNTS IN TERMS OF IDENTITY, CREDIT WORTHINESS OF THE SHAREHOLDERS AND GENUINENESS OF THE TRANSACTIONS BY ACTUALLY PRODUCING RELEVANT CHAIN OF TRANSACTIONS TO PROVE THAT MONEY SO SIPHONED OFF IS THE SAM E AS THAT INTRODUCED AS BOGUS SHARE CAPITAL AND THE ASSESSING OFFICER HAS NOT MADE ANY ADDITIONS U/S 68 ONLY ON THE BASIS OF NARRATED MODUS OPERANDI WITHOUT PROBING THE RELEVANT CHAIN OF TRANSACTIONS . THUS THE ASSESSMENTS ARE FOUND TO BE ERRONEOUS IN SO F AR AA IT IS PREJUDICIAL TO THE INTEREST OF REVENUE AS ENVISAGED IN SECTION 263 OF THE I.T. ACT. IN VIEW OF THIS, THE ASSESSMENT ORDERS FOR ASSESSMENT YEARS 2009 - 1 0 TO 2 0 14 - 15 U/S 153A R.W.S. 143(3) PASSED BY THE ASSESSING OFFICER ON 01/04/2015 ARE SET ASID E FOR DE NOVO ASSESSMENT BY THE ASSESSING OFFICER AFTER GIVING ADEQUATE OPPORTUNITY TO THE ASSESSEE OF BEING HEARD. 1 8 . THUS, FROM THE ABOVE IT IS EVIDENT THAT THE LD. CIT WHILE CONCLUDING OBSERV ED THAT THE A.O. SHOULD HAVE CONSIDERED THE ADDITION U/S. 68 IN THIS IS CASE FOR BOGUS CAPITAL. PRIOR TO THAT HE HAS ALSO OBSERVED THAT THE DEPRECIATION ADMITTED ON BOGUS PURCHASE SHOULD HAVE BEEN CONSIDERED FOR DISALLOWANCE U/S. 115JB. HE HAS ALSO DOUBTED THE VERACITY OF FIGURE OF DEPRECIATION WITHDRAWN IN ABSENCE OF DETAIL OF ASSETS . HE HAS ALSO OPINED EARLIER THAT THE A.O. SHOULD HAVE REJECTED THE BOOK S IN VIEW OF BOGUS PURCHASE 20 ITA NO. 2912 /M/2018 & OTHERS BOOKING. HE HAS SET ASIDE THE MATTER OF ASSESSMENT TO THE FILE OF THE A.O. FOR DENOVO ASSESSMENT. 1 9 . IN THE OTHER THREE GROUP COMPANIES, THE LD. CIT HAS MADE SIMILAR OBSERVATIONS. THE SHOW CAUSE NOTICE IN THE CASE OF M/S. WELLKNOWN TEXTILE INDIA P. LTD. MAY BE REFERRED HERE FOR THE SAKE OF REFERENCE: 2 ON EXAMINATION OF RECORDS FOR AYS 2009 - 1 0 , IT IS NOTICED THAT THE ASSESSMENT PROCEEDINGS WERE COMPLETED U/S 143 (3) R.W.S 153A OF THE IT ACT AND TOTAL INCOME WAS DETERMINED AS DETAILED IN TABLE - I BELOW. TABLE 1: S R . NO. AY RETURN INCOME TOTAL INCOME AS PER NORMAL PROVISIONS BOOK PROFIT AS PER SEC.115JB DATE OF ASSESSMENT 2 2009 - 10 NIL ( - ) 99,88,033 29,04,947 01.04.2015 3. IN THE CONTEXT, IT IS NOTED THAT A SCORCH U/S 132(1) OF THE IT ACT WAS CARRIED OUT IN M/S WELTKNOW N GROUP OF COMPANIES ON 23.5 - 2013 AND ON SUBSE QUENT DATES BY THE INVESTIGATION WING OF THE DEPARTMENT. DURING THE COURSE OF SEARCH OPERATION, SHRI ANIL GUPTA, CMD OF THE GROUP STATED THAT M/S WE LLK NOWN POLYESTERS LTD HAD DEBITED CAPITAL EXPENDITURE BILL ON ACCOUNT OF PURCHASES OF BOGUS ASSETS AND IN TURN THAT AMOUNT WAS ROUTED THROUGH VARIOUS SHELL COMPANIES AND INTRODUCED INTO THE GROUP CONCERNS OF WELLKNOWN GROUP (VIZ. WELLKN OWN TECHNOLOGIES PVT LTD, WELLKNO WN TEXTILE INDUSTRIES PVT, LTD , BRADMA LOGISTICS PARKS PUT. LTD. T ASHT AVINAYAK AGRA FARMS PVT LTD., NISHITA INFRAS TRUCTURE PVT. LTD., ETC.] IN THE FORM OF PREFERENCE SHARES [WITH HUGE PREMIUM/ /SHARE APPLICATION MONEY.; AND THEN THE FUNDS WERE BROUGHT BACK IN THE BOOKS OF WE LL KNO WN POTYSTERS LTD. BY SUBSCRIBING PREFERENCE SHARES WITH PREMIUM TO ITS GROUP CONCERNS. 4. THE BALANCE SHEET OF THE ASSESSES FOR AY 2009 - JO REVEALS THAT THE ASSESSES COMPANY HAS RECEIVED SHARE APPLICATION MONEY {WITH PREMIUM/ OF RS 12.25 CFORES FOR ALLOTMENT OF PREFERENTIAL SHARES. THE TABLE NO 2 BELOW REFLECTS THE DETAILS OF MONEY RECEIVED D URING THE YEAR AS UNDER: - TABLE NO - 2: DETAILS OF SHARE APPLICATION MONEY RECEIVED/SHARE ALLOTMENT MADE DURING THE YEAR: SR. NO. NAME OF THE PARTY AMOUNT (RA.) 1 TVC SKY SHOP LTD. 12,25,00,000 TOTAL 12,25,00,000 5. A PERUSAL OF RECORDS AND A SSESS MENT ORDER SHOWS THAT THE AO HAS NOT M A D E DUE ENQUIRIES REGARDING THE SHARE CAPITAL /AND (HE HUGE PREMIUM/ /SHARE APPLICATION MONEY RECEIVED THROUGH THE SAID COMPANY. FROM THE ASSESSMENT ORDERS PASSED IN THE CASE OF WELLKNOWN POLYE STERS PVT. LTD. , IT IS NOTED THAT THOUGH THE AO HAS TAKEN NOTE OF THE MODUS OPERANDY FOR DEBITING THE BOGUS CA P ITAL EXPENSES BI LL S AND THEN INTRODUCING BACK THA T MON EY IN THE BOOKS OF THE GROUP CONCERNS OF WE LLKNOWN GROUP /VIZ. WELL KNOWN 21 ITA NO. 2912 /M/2018 & OTHERS TECHNOLOGIES PUT. LTD, WELLKNO WN TEXTILE INDUSTRIES PVT LTD., BRADMA LOGISTICS PARKS PUT. LTD., ASHTAUMAYAK AGRRO FARMS PVT LTD., NISHTTTT INFRASTRUCTURE PVT LTD., ETC,/ THROUGH VARIOUS SHELL COMPANIES IN. THE FORM OF PREFERENCE SHARES I WITH HUGS PREMIUM] /SHARE APPLICATION MONEY; BUT W HILE COMPLETING THE ASSESSMENT OF THIS ASSESSES COMPANY, THE AO HAS SIMPLY OBTAINED THE LIST OF SUCH SHELL COMPANIES FROM WHICH SHARE APPLICATION MONEY F WITH PREMIUM/ WERE RECEIVED AND/ OR PREFERENCE SHARES WERE ALLOTTED. BUT NO ENQUIRES WERE MADE TO ASCE RTAIN AS TO WHETHER THE SOURCE OF SUCH FUND WAS THE INTRODUCTION OF BOGUS PURCHASE BILLS IN. THE BOOKS OF WELLKN OWN POLYESTERS PT. LTD. THE ASSESSEE COMPANY TOO HAD NOT FILED ANY DETAILS PROVING THE NEXUS OF SU C H SHARE CAPITAL/ SHARE APPLICATION MONEY WITH THE SAID BOGUS PURCHASES, I F THAT WAS THE CASE, THE ASSESSES GROUP OUGHT TO HAVE CORRECTED THE BOOKS OF ACCOUNTS LATER AF TER SEARCH.. BUT IT IS NOTED THAT THE {PREFERENTIAL} SHARE CAPITAL STILL REMAINS AS SUCH IN THEIR BOOKS OF ACCOUNTS. IN VIEW OF THESE FACTS, THE AO OUGHT T O HAVE EXAMINED THE TAXABILITY OF SUCH SHARE CAPITAL TOGVLHER WILH PREMIUM / SHARE APPLICATION MONEY, IN THE HANDS OF THE ASSESSES U/S 68 AND / OR SECTION OF THE INCOME TAX ACT, 1961. 6. IN VIEW OF THE ABOVE, 'IT IS DEAR THAT THERE IS FA ILURE ON THE PART OF THE ASSESSING OFFICER TO MAKE DUE, EXAMINATION OF THE ISSUE OF SHARE APPLICATION MONEY RECEIVED AND/ OR (PREFERENTIAL) SHARE CAPITA/ / WITH PREMIUM} INTRODUCED IN THE HOOKS OF ACCOUNTS OF THE ASSESSEE COMPANY /I.E. WELLKNOWN TEXTILE INDUSTRIES PVT. LTD} WHICH HAS RENDERED THE IMPUGNED ASSESSMENT ORDER PASSED U / S 143(3} R.IUS, 153A OF THE JT ACT, ERRONEOUS, IN SO FAR AS IT IS PREJUDICIAL TO THE INTERESTS OF REV ENUE, IN TERMS OF EXPLANATION 2 TO SECTION 263 OF THE? IT ACT. 7, I H VIEW OF THE ABOVE, YOU ARE REQUESTED TO SHOW CAUSE AS TO WHY THE SAID ASSESSMENT ORDER DATED 01.04,2015 FOR AY 2009 - 10 SHOULD NOT BE REVISED M / S 263 OF THE IT ACT, 1961, YOUR OBJECTIONS, IF ANY, TO THE PROPOSED REVISION OF ASSESSMENT ORDER MAY BE FI L ED ON OR BEFORE 12.03.2018 . 20 . IN THE BODY OF THE ORDER U/S. 263, THE LD. CIT MADE SIMILAR OBSERVATIONS IN THE CASE OF M/S. WELLKNOWN POLYESTER LTD. AS ABOVE. HE ALSO OBSERVED AS UNDER: 6.3 THE RECORDS INDICATE THAT THE A.O. HAD ACCEPTED THE SUBMIS SIONS OF THE ASSESSEE COMPANY THAT THE BOOK'S SHARE CAPITAL RECEIVED BY THE ASSESSEE COMPANY IS A PART OF THE DISCLOSURE MADE BY THE M/S. WELLKNOWN POLYESTER LTD., ON FACE VALUE WITHOUT CONDUCTING ANY ENQUIRIES AS TO HOW BOTH ARE LINKED BY WAY OF DIRECT NE XUS. THEREFORE, RECORD ITSELF INDICATES THAT THE A.O. HAS NOT APPLIED HIS MIND ON THE ISSUE AND WENT AHEAD TO ACCEPT THE GENUINENESS OF THE SHARE CAPITAL WITHOUT THE ONUS IN THIS REGARD DISCHARGED BY THE ASSESSEE. 21 . THE LD. CIT IN HIS CONCLUSION HAS OBSERVED AS UNDER: CONCLUSION: 8 IT IS CLEAR FROM THE DISCUSSIONS CONTAINED IN THE FOREGOING PARAGRAPHS THAT THE ASSESSING OFFICER HAS FAILED TO CARRY OUT NECESSARY ENQUIRIES AS WARRANTED BY THE FACTS AND CIRCUMSTANCES OF THE CASE A N D APPLY T H E CORRECT PROVISIONS OF THE LAW AS DISCUSSED ABOVE IGNORING THE OVERWHELMING EVIDENCES GATHERED DURING THE COURSE OF SEARCH CARRIED ON 23/05/2013 AND FURTHER REAFFIRMED BY THE STATEMENTS OF VARIOUS RESPONSIBLE PERSONS RECORDED AT THE TIME OF SEA RCH AND DURING POST SEARCH PROCEEDINGS, WHEREIN IT HAS BEEN CLEARLY ADMITTED THAT BOGUS CAPITAL HAS BEEN INTRODUCED BY USING THE SHELL COMPANIES AS CONDUITS. THUS, THE ASSESSMENTS ARE FOUND TO BE ERRONEOUS IN SO FAR AS IT IS PREJUDICIAL TO 22 ITA NO. 2912 /M/2018 & OTHERS THE INTEREST OF REVENUE AS ENVISAGED IN SECTION 263 OF THE I.T. ACT. HOWEVER, NO PREJUDICE IS CAUSED TO TH E ASSESSEE, IN CASE THE A.O. IS DIRECTED TO PROVIDE REASONABLE OPPORTUNITY TO THE ASSESSEE TO DISCHARGE ITS ONUS, BEFORE COMING TO AN Y FINAL CONCLUSION. NEVERTHELESS, WHILE ANALYZING THE CHAIN OF CIRCUITOUS TRANSACTIONS, IF ANY, SUBMITTED BY THE ASSESSEE IN DISCHARGE OF ITS ONUS, IF ANY, ANY OTHER INCOME CHARGEABLE TO TAX IS NOTICED BY THE A.O,, HE SHALL NOT ONLY BE FREE BUT ALSO DUTY BOUND TO TAX SUCH INCOME IN THE CA SE OF THE ASSESSEE. THE ASSESSMENT ORDER IS SET ASIDE ACCORDINGLY. 2 2 . AGAINST THE ABOVE ORDER, THE ASSESSEE IS IN APPEAL BEFORE US. 2 3 . WE HAVE HEARD BOTH THE COUNSEL AND PERUSED THE RECORDS. THE LD. COUNSEL OF THE ASSESSEE SUBMITTED THAT THE ASSESSMENT ORDER IN ALL THESE CASES HAVE BEEN PASSED UNDER SECTION 153A OF THE ACT ON THE SAME DATE BY THE SAME A.O. HE SUBMITTED THAT THE A.O. WHILE COMPLETING THE ASSESSMENT HAS TAKEN INTO AC COUNT THE OVERALL MODUS OPERANDI OF THE GROUP. HE SUBMITTED THA T AFTER THE APPLICATION OF MIND THE A.O. HAS COMPLETED THE ASSESSMENT. HE SUBMITTED THAT THE A.O. HAS COMPUTED THE DETAIL OF FICTITIOUS CAPITAL EXPENDITURE BOOKED AND ITS ROUTING BACK AS SHARE CAPITAL INTRODUCTION IN THE GROUP. HE SUBMITTED THAT BEING SATI SFIED WITH THE SAID RECONCILIATION, THE A.O. HAS NOT PROPOSED ANY FURTHER ADDITION. THE LD. COUNSEL OF THE ASSESSEE CLAIMED THAT THE A.O. HAS NOT PROPOSED ANY FURTHER ADDITION. HE CLAIMED THAT THE DETAIL AND RECONCILIATION WERE BEFORE THE INVESTIGATION WIN G ALSO, AND NO ADVERSE COMMENT WAS MADE BY THEM ALSO. FURTHER, H E SUBMITTED THAT THE A.O. HAS CONSIDERED THE FACT THAT ON ONE HAND THERE IS BOGUS CAPITAL EXPENDITURE APPEARING IN THE BALANCE SHEET OF WELL - KNOWN POLYESTER , ON THE OTHER HAND THE AMOUNT FROM FUNDS ROUTED OFF BY THESE CAPITAL EXPENDITURE BY PAYMENT TO SHELL COMPANIES HAVE COME BACK AS SHARE CAPITAL TO THE WELL - KNOWN GROUP COMPANIES. HENCE , THE LD. COUNSEL OF THE ASSESSEE SUBMITTED THAT NO OUTSIDE BOGUS CAPITAL HAS BEEN INTRODUCED. HE HELD THAT THE FICTITIOUS CAPITAL ASSETS IN THE FORM OF FICTITIOUS CAPITAL EXPENDITURE ARE REPRESENTED BY BOGUS CAPITAL INTRODUCTION. HE SUBMITTED THAT THESE TWO 23 ITA NO. 2912 /M/2018 & OTHERS CANCEL EACH OTHER. HE CLAIMED THAT THE FUNDS WHICH HAVE BEEN TAKE N OUT FROM M/S.W ELL - KNOWN P OLYESTER S L TD. AND I NTRODUCED IN THE FORM OF SHARE CAPITAL IN THE GROUP CANNOT AGAIN BE ADDED AS THE SOURCE OF THE FUND IS THE ASSESSEE GROUP ITSELF. HE CLAIMED THAT T HE ONLY RESULT IS THE CLAIM OF BOGUS DEPRECATION IN THE CASE OF M/S.W ELL - KNOWN P OLYESTER S L TD. H E S U BMITTED THAT THIS HAS BEEN DULY WITHDRAWN BY THE ASSESSEE AND HAS BEEN ACCEPTED BY THE A.O. AFTER DUE EXAMINATION. THE LD. COUNSEL OF THE ASSESSEE SUBMITTED THAT THE ENTIRE DETAILS OF BOGUS CAPITAL INTRODUCTION THROUGH THE SHELL COMPANIES IN THE GROUP COMP ANIES WAS TAKEN INTO CONSIDERATION BY THE A.O. IN THE ASSESSMENT ORDER. THE LD. COUNSEL OF THE ASSESSEE FURTHER SUBMITTED THAT IN THE CASE OF M/S. WELLKNOWN TECHNOLOGIES PVT. LTD. IN ORIGINAL ASSESSMENT , ADDITION WAS MADE BY THE A.O. FOR BOGUS SHARE CAPITAL . THE ADDITION WAS DELETED BY THE LD. CIT . THE REVENUE HAS DULY RAISED THE ISSUE OF INTRODUCTION OF BOGUS SHARE CAPITAL WHICH HAD TRAVELLED WITH THE ITAT. HE SUBMITTED THAT THE SAME HAS BEEN DULY DELETED. HENCE , THE LD. COUNSEL OF THE ASSESSEE SUBMITTED THAT WHEN THE MATTER IS ALREADY CONCLUDED BY THE ITAT, THE SAME CAN NOT BE VISITED AGAIN BY THE A.O. U/S. 153A OF THE ACT AND THE SAME CANNOT BE VISITED BY THE LD. CIT UNDER THE JURISDICTIONAL POWER U /S. 263 OF THE A CT. HE FURTHER SUBMITTED THAT IN S . 153A A SSESSMENT OF M/S. WELLKNOWN POLYESTERS LTD. SEVERAL OTHER ADDITIONS WERE MADE WHICH WERE DELETED BY THE LD. CIT AND CONFIRMED BY THE ITAT, AS THE SAME WERE DE HORS INCRIMINATING MATERIAL FOUND IN SEARCH. HENCE, THE LD. COUNSEL OF THE ASSESSEE PLEADED THAT W HEN NO INCRIMINATING MATERIAL WAS FOUND REGARDING THE INTRODUCTION OF BOGUS SHARE CAPITAL FOR OTHER SOURCES, THE A.O. HAS NEITHER ANY REASON NOR JURISDICTION TO EXAMINE THIS ASPECT. 24 ITA NO. 2912 /M/2018 & OTHERS 24. FURTHERMORE, THE LD. COUNSEL OF THE ASSESSEE SUBMITTED THAT THE A.O. HAS CLEARLY BROUGHT OUT ALL THE ASPECTS OF THE MATTER IN DETAIL AND HAS CLEARLY MENTIONED THAT IN THESE FACTS NO OTHER ADDITION IS BEING CONSIDERED. HE SUBMITTED THAT THE VIEW ADOPTED BY THE ASSESSEE IS CLEAR AND COGENT. IN ANY CASE, HE CLAIMED THAT THE V IEW ADOPTED BY THE A.O. IS A POSSIBLE ONE. HENCE , HE SUBMITTED THAT AS HELD BY THE HONBLE APEX COURT IN THE CASE OF MALABAR INDUSTRIAL CO. LTD. VS. CIT (2000) 243 ITR 83 (SC) AND CIT VS. MAX INDIA LTD. (2007) 295 ITR 282 (SC) IF TWO VIEWS ARE POSSIBLE AND THE ASSESSING OFFICER ADOPTS ONE VIEW TO WHICH THE LD CIT - IS NOT IN AGREEMENT WITH THE SAME WILL NOT RESULT IN THE ASSESSMENT ORDER BEING ERRONEOUS INSOFAR AS IT IS PLEA JUDICIAL TO THE INTEREST OF REVENUE. 25. AS REGARDS THE ISSUE OF DISALLOWANCE OF DEPRECATION U /S. 1 15 JB IS CONCERNED , THE LD COUNSEL OF THE ASSESSEE SUBMITTED THAT THE SAME HAS BEEN DULY CONSIDERED BY THE A.O. IN THE COMPUTATION OF INCOME. THE A.O. BEING CONSCIOUS OF THE DECISION OF HONBLE APEX COURT IN THE CASE OF APOLLO TYRES LTD. (SUPRA) AND OTHERS HAS NOT TINKERED WITH THE BOOK PROFIT. HE S UBMITTE D THAT THIS IS ALSO A POSSIBLE VIEW . HENCE , HE SUBMITTED THAT THE LD. CIT DOESN'T HAVE ANY JURISDICTION TO EXERCISE POWERS U /S. 263 OF THE A CT. THE LD. COUNSEL OF THE ASSESSEE PLACED RELIANCE UPON A C ATENA OF CASE LAWS IN SUPPORT OF THIS PROPOSITION. 26. PER CONTRA, THE LD. DEPARTMENTAL REPRESENTATIVE (LD. DR FOR SHORT) PLACED RELIANCE ON THE ORDER OF THE LD. CIT. 27. HE SUBMITTED THAT T HE LD. CIT(A) HAS ONLY REMITTED THE MATTER F OR EXAMINATION BEFORE THE A.O. HENCE, HE SUBMITTED THAT THERE IS NO PREJUDICE TO THE ASSESSEE. HE FURTHER PLACED RELIANCE UPON THE FOLLOWING CASE LAWS FROM THE HONBLE APEX COURT IN THE CASE OF DENIEL MERCHANTS P. LTD. & OTHERS VS. ITO (IN APPEAL NO. 23976 /2017). 25 ITA NO. 2912 /M/2018 & OTHERS 28. UPON CAREFUL CONSIDERATION, WE NOTE THAT THE ASSESSMENT S IN THIS CASE PERTAIN TO THE SAME GROUP. ALL T HE ASSESSMENTS WERE CONDUCTED PURSUANT TO SEARCH U/S. 153 A OF THE ACT ON THE SAME DATE BY THE SAME A.O. SINCE THE ISSUE ORIGINATED FROM THE M/S. WELLKNOWN POLYESTERS LIMITED, THE A.O. IN THE ASSESSMENT OF THAT ASSESSEE GAVE THE DETAIL S OF THE MODUS OPERANDI OF BOGUS TRANSACTIONS DONE BY THE ASSESSEE GROUP COMPANY . THE MODUS OPERANDI WHICH WAS NOTED BY THE A.O. WHICH HAS ALSO BEEN BROUGHT OUT BY THE LD. CIT IN HIS 263 ORDER IS AS UNDER: 1) FICTITIOUS CAPITAL EXPENDITURE BILLS WERE DEBITED IN THE BOOKS OF M/S. WELLKNOWN POLYESTERS LIMITED. 2) EQUIVALENT AMOUNT OF C APITAL EXPENDITURE PURCHASE OF FIXED BILLS WERE GIVEN TO SHELL COMPANIES. 3) THESE SHELL COMPANIES INVESTED SHARE APPLICATION MONEY AT A HIGH PREMIUM TO M/S. WELLKNOWN GROUP COMPANIES. 29. THUS FUNDS WERE FINALLY BROUGHT BACK INTO M/S. WELLKNOWN POLYESTERS LIMITED. THE PARTY - WISE, YEAR - WISE BREAK UP OF FICTITIOUS CAPITAL P URCHASE FROM SHELL COMPANIES IN THE BOOKS OF ACCOUNT OF M/S. WELLKNOWN POLYESTERS LIMITED WAS PLACED IN ANNEXURE - 1 BY THE A.O. THE C HART OF THESE PURCHASES AND THE DEP RECIATION WITH RESPECT TO THAT HAVE BEEN BROUGHT OUT BY THE A.O. IN HIS ORDER AS NOTED ABOVE. AS A RESULT OF THE ABOVE, THE ASSESSEE HAS ACCEPTED THE FICTITIOUS CAPITAL PURCHASES AND WITHDRAWN THE EXCESS DEPRECATION AMOUNTING TO RS.58,57,32,379/ - ON THE TOTAL FICTITIOUS PURCHASE OF RS.1,88,38,94,388/ - . THE YEAR - WISE DETAIL OF THIS ALSO IS THERE IN THE ASSESSMENT ORDER. THE IMPACT OF THIS W AS THAT THE EXCESS FICTITIOUS DEPRECIATION WAS WITHDRAWN AND THE RESULTANT SUM WAS OPEN FOR TAXATION. THE A.O. IN HIS ORDER ALSO MADE A NOTE OF THE ENTITIES FROM WHICH THE AMOUNT PAID AGAINST FICTITIOUS PURCHASES CAME BACK IN THE FORM OF SHARE CAPITAL IN A NNEXURE 2 THEREOF. THE SAME BROUGHT OUT IN DETAIL THE NA ME OF THE GROUP COMPANY IN WHOM BOGUS CAPITAL WAS INTRODUCED, I DENTIFYING THE SHELL COMPANY INVOLVED AND THE DATE OF TRANSACTION. HERE IT IS NOTEWORTHY THAT THE ENTIRE DETAIL OF BOGUS CAPITAL EXPENDIT URE AND 26 ITA NO. 2912 /M/2018 & OTHERS RE - ROUTING IN BOGUS CAPITAL WAS THERE BEFORE THE A.O. AS WELL AS THE INVESTIGATION WING AND NOTHING ADVERSE HAS BEEN POINTED OUT IN THE RECONCILIATION. IN THESE CIRCUMSTANCES, THE A.O. NOTED THAT DURING THE ASSESSMENT YEAR , THE CAPITAL EXPENDITURE PURCHASE WHICH WAS FICTITIOUS WAS DISCLOSED AND EXCESS DEPRECIATION WAS WITHDRAWN. HENCE, HE OBSERVED THAT NO FURTHER ADDITION IS MADE IN THIS REGARD. THE A.O. MADE SOME OTHER ADDITION WITH RESPECT TO DISALLOWANCE OF EXPENDITURE U/S.14A, DISALLOWANCE OF P ROVISION FOR REDEMPTION OF PREFERENCE SHARES U/S.115JB AND DISALLOWANCE OF INTEREST ON FIXED DEPOSIT FOR S . 80IB CLAIM. IN THE CASE OF OTHER ASSESSEES OF THE GROUP, IN THE ASSESSMENT ORDER PASSED ON THE SAME DATE, THE A.O. DID NOT CONSIDER ANY ADDITION IN THIS REGARD. HE CONSIDERED SOME OTHER ADDITION WITH RESPECT TO DISALLOWANCE U/S.14A. FROM THE ABOVE, IT IS EVIDENT THAT THE ASSESSMENT HAS BEEN DONE ON AN OVERALL BASIS FOR THE ENTIRE GROUP. THE ASSESSEE HAS HIMSELF ACCEPTED THAT FICTITIOUS CAPITAL EXPENDI TURE HAS BEEN BOOKED. THE PAYMENT AGAINST THIS FICTITIOUS CAPITAL PURCHASE BILLS HAVE BEEN ROUTED BACK THROUGH SHELL ENTITIES TO THE ASSESSEES GROUP COMPANIES. THE LIST OF THE ENTITIES IS ALSO BEEN PROVIDED. THERE IS NO DISPUTE IN THIS REGARD. 30. IN S .2 63 NOTICE IN THE CASE OF M/S.WELLKNOWN POLYESTERS L TD , THE LD. CIT(A) FIRSTLY MENTIONED THE MODUS OPERANDI WHICH WAS THERE IN THE ASSESSMENT ORDER. THEREAFTER, HE NOTED THAT EVEN AFTER WITHDRAWING THE DEPRECIATION O N BOGUS CAPITAL EXPENDITURE, THE COMPAN Y M/S. WELLKNOWN POLYESTERS L TD DID NOT REDUCE THE CORRESPONDING DEPRECIATION AS PER THE COMPANIES ACT FOR THE PURPOSE OF COMPUTATION U/S. 115JB. HENCE, LD. CIT WAS OF THE OPINION THAT THERE WAS FAILURE ON THE PART OF THE A.O. TO MAKE DUE EXAMINATION OF TH E ISSUE OF DISALLOWANCE OF CLAIM AND DEPRECATION AS PER THE COMPANIES ACT ON PURCHASE OF BOGUS ASSETS WHILE COMPU TING THE BOOK PROFIT U/S. 115JB. H ENCE, HE OPINED THAT THE 27 ITA NO. 2912 /M/2018 & OTHERS ASSESSMENT ORDERS ARE ERRONEOUS INSOFAR AS IT IS PREJUDICIAL TO THE INTEREST OF THE REVENUE. THE LD. CIT NOTED THE RESPONSE OF THE ASSESSEE ON THIS ISSUE WHEREIN IT WAS MENTIONED THAT THE A.O. CANNOT TINKER THE BOOK PROFIT COMPUTED U/S. 115JB . FOR THIS PROPOSITION , SEVERAL CASE LAWS INCLUDING THAT OF THE HONBLE APEX COURT IN THE CASE OF AP OLLO TYRES LTD. (SUPRA) AND MALAYALA MANORAMA CO.LTD. (SUPRA) AND SEVERAL DECISION OF JURISDICTIONAL HIGH COURT INCLUDING THAT OF KINETIC MOTAR CO. LTD. (SUPRA) AND ADBHUT TRADING CO. P. LTD. (SUPRA) AND SEVERAL OTHERS WERE QUOTED BY THE ASSESSEE. IT WAS F URTHER CONTENDED THAT THE A.O. HENCE HAS APPLIED HIS MIND WHILE WORKING OUT BOOK PROFIT U/S. 115JB AND, THEREFORE, IT WAS SUBMITTED THAT THESE ORDERS CANNOT BE REVISED U/S.263 OF THE ACT. T HE ASSESSEE IN THIS REGARD ALSO REFERRED TO THE DECISION OF THE HONBLE APEX COURT IN THE CASE OF MALABAR INDUSTRIAL CO. LTD. ( SUPRA) AND MAX INDIA LTD. ( SUPRA ) WHICH HAD THE PROPOSITION THAT IF THERE ARE TWO VIEWS POSSIBLE AND THE A.O. HAS ADOPTED ONE VIEW, WITH WHICH THE LD. CIT IS NOT IN AGREEMEN T WITH THE ASSESSMENT ORDER , CANNO T BE SAID TO BE LIABLE TO BE VISIT ED WITH THE REVISIONARY ORDER BY THE LD. CIT. 31. AFTER NOTING THE ABOVE RESPONSE, THE LD. CIT PROCEEDED TO REPRODUCE THE PORTION OF THE FINDINGS OF THE SEARCH PARTY. HE NOTED THE LIST OF THE 68 PARTIES FROM WHOM FICTITIOUS PURCHASES WERE BOOKED. THEREAFTER, HE NOTED THE ACCEPTANCE BY THE ASSESSEE GROUP DIRECTORS THAT THESE PURCHASES WERE BOGUS. HE FURTHER NOTED THE MODUS OPERANDI ACCEPTED BY THE ASSESSEE AND THE WITHDRAWAL OF DEPRECIATI ON. HE NOTED THAT THE ASSESSEE HAS WITHDRAWN THE DEPRECATION CLAIM OF BOGUS ASSET BUT HAS NOT FURNISHED ANY DETAIL OF ASSETS ON WHICH DEPRECATION HAS BEEN WITHDRAWN. HE NOTED THAT THE A.O. HAS ACCEPTED THE ASSESSEES CLAIM WITHOUT VERIFICATION. THEREAFTER LD. CIT REFERRED TO NAME OF THE GROUP COMPANIES. THE ACCEPTANCE OF BOGUS SHARE CAPITAL FROM THE GROUP PARTY - WISE, YEAR WISE WERE SUBMITTED. HERE THE LD. CIT NOTED THAT THE A.O. HAS SIMPLY OBTAINED THE LIST OF THE SHELL COMPANIES THROUGH WHICH SHARE APPLICA TION MONEY WAS RECEIVED BUT NO ENQUIRY WAS 28 ITA NO. 2912 /M/2018 & OTHERS MADE TO ASCERTAIN AS TO WHETHER THE SOURCE OF SUCH FUNDS WAS THE INTRODUCTION OF THE BOGUS PURCHASE BILLS IN THE BOOKS OF M/S. WELLKNOWN POLYESTERS LIMITED . HE FURTHER NOTED THAT THE ASSESSEE COMPANY HA D NOT FILED ANY DETAILS PROVING THE NEXUS OF SUCH SHARE CAPITAL/SHARE APPLICATION MONEY WITH THE SAID BOGUS PURCHASE. HENCE, THE LD. CIT OBSERVED THAT THE A.O. OUGHT TO HAVE EXAMINE D THE TAXABILITY OF SUCH SHARE CAPITAL TOGETHER WITH PREMIUM IN THE HANDS OF THE ASSES SEE COMPANY U/S. 68 AND/OR SECTION 2(24)(IV) OF THE ACT. HE NOTED THAT THE SHARE CAPITAL AND ASSESSEES GROUP COMPANIES CONFESSED AS BOGUS HAS NOT BEEN OFFERED AS SUCH FOR TAXATION BY ANY OF THE GROUP CONCERNS INCLUDING THE ASSESSEE COMPANY. THEREAFTER, THE LD. CIT(A) MENTIONED THAT HE HAS GONE THROUGH THE SUBMISSIONS OF THE ASSESSEE. HE PROCEEDED TO REFER TO THE CERTAIN CASE LAWS FROM THE TRIBUNAL FOR THE PRO POSITION THAT BOOK PROFIT U/S. 115JB CAN BE REWORKED WHEN IT IS APPARENT THAT THE BOOKS ARE PREPA RED NOT IN ACCORDANCE WITH THE COMPANIES ACT. NOWHERE IN THIS PART OF HIS ORDER, THE LD. CIT EITHER REFERRED TO THE SEVERAL DECISION OF THE HONBLE APEX COURT AND HON'BLE JURISDICTIONAL HIGH COURT REFERRED B Y THE ASSESSEE IN THIS REGARD BEFORE HIM. EVEN AT THIS STAGE, THE LD. CIT DID NOT DIRECT THAT THE SAID AMOUNT OF BOGUS DEPRECIATION SHOULD BE WITHDRAWN FROM THE COMPUTATION OF PROFIT U/S. 115JB. HE EARLIER OBSERVED THAT IN SUCH A SITUATION OF BOGUS PURCHASE BOOKING, THE A.O. SHOULD HAVE ASKED THE ASSESSE E TO GET ITS ACCOUNT SPECIALLY AUDITED OR REJECT ED ITS BOOKS OF ACCOUNT. THEREAFTER THE LD. CIT REFERRED TO SEVERAL CASE LAWS. 32. IN THE CONCLUSION IN PARA 8 OF HIS ORDER, HE MENTIONED THAT THE A.O. HAS FAILED TO CARRY OUT THE NECESSARY ENQUIRES. THAT H E HAD ACCEPTED THE UNRELIABLE AND INCORRECT STATEMENT OF ACCOUNT. THAT THE ASSESSEE HAS ALSO NOT DISCHARGED THE PRIMARY ONUS TO PROVE THE SOURCE OF SHARE CAPITAL INTRODUCED IN ITS BOOKS OF ACCOUNTS IN TERMS OF IDENTITY, CREDIT 29 ITA NO. 2912 /M/2018 & OTHERS WORTHINESS OF THE SHAREHOLDER S AND GENUINENESS OF THE TRANSACTIONS. THAT THE A.O. HAS NOT MADE ANY ADDITIONS U/S 68 BY ACCEPTING NARRATED MODUS OPERANDI WITHOUT PROBING THE RELEVANT CHAIN OF TRANSACTIONS. HENCE, THE LD. CIT HELD THAT THE ASSESSMENT HAVE FOUND TO BE ERRONEOUS INSOFAR A S IT IS PREJUDICIAL TO THE INTEREST OF REVENUE. HENCE, HE SET ASIDE THE ORDER FOR DENOVO ASSESSMENT BY THE A.O. AFTER GIVING OPPORTUNITY TO THE ASSESSEE. 33. FROM THE ABOVE ORDER OF THE LD. CIT U/S. 263 IN THE CASE OF M/S. WELLKNOWN POLYESTERS LTD., WE NOTE THAT BASICALLY THE LD. CIT HAS DEALT WITH FOLLOWING ISSUES WHICH ACCORDING TO HIM ARE NOT BEEN CONSIDERED PROPERLY ENQUIRED BY THE A.O. THE SAME ARE AS UNDER: 1) FIRSTLY, THE DISALLOWANCE OF BOGUS DEPRECATION WITHDRA WN FOR THE PURPOSE OF SECTION 115JB. 2) SECONDLY , THE ACCEPTANCE OF THE WITHDRAWAL CLAIMS FOR DEPRECATION WITHOUT REFERRING TO SCHEDULE OF ASS ETS . 3) FINALLY, THE CONSIDERATION OF ADDITION OF BOGUS SHARE CAPITAL U/S. 68. 4) OBSERVING IN THE BODY OF THE O RDER THAT A.O. SHOULD HAVE ORDERED A SPECIAL AUDIT DONE OR REJECTED THE BOOK. 34. AS REGARDS THE FIRST ISSUE OF DISALLOWANCE OF WITHDRAWAL CLAIM OF DEPRECIATION FROM COMPUTATION OF INCOME U/S.115JB IS CONCERNED, WE CAN GAINFULLY REFER TO THE PROVISION OF SECTION 115JB OF THE ACT AS UNDER: SPECIAL PROVISION FOR PAYMENT OF TAX BY CERTAIN COMPANIES. 85 86 115JB. (1) NOTWITHSTANDING ANYTHING CONTAINED IN ANY OTHER PROVISION OF THIS ACT, WHERE IN THE CASE OF AN ASSESSEE, BEING A COMPANY, THE INCOME - TAX, PAYABLE ON THE TOTAL INCOME AS COMPUTED UNDER THIS ACT IN RESPECT OF ANY PREVIOUS YEAR RELEVANT TO THE ASSESSMENT YEAR COMMENCING ON OR AFTER THE 1ST DAY OF APRIL, 87 [2012], IS LESS THAN 88 [EIGHTEEN AND ONE - HALF PER CENT] OF ITS BOOK PROFIT, 89 [SUCH BOOK PROFIT SHALL BE DEEMED TO BE THE TOTAL INCOME OF THE ASSESSEE AND THE TAX PAYABLE BY THE ASSES SEE ON SUCH TOTAL INCOME SHALL BE THE AMOUNT OF INCOME - TAX AT THE RATE OF 88 [EIGHTEEN AND ONE - HALF PER CENT]]. (2) 90 [EVERY ASSESSEE, ( A ) BEING A COMPANY, OTHER THAN A COMPANY REFERRED T O IN CLAUSE ( B ), SHALL, FOR THE PURPOSES OF THIS SECTION, PREPARE ITS 91 [STATEMENT OF PROFIT AND LOSS] FOR THE RELEVANT PREVIOUS YEAR IN ACCORDANCE WITH THE PROVISIONS OF 92 [SCHEDULE III] TO THE 93 [COMPANIES ACT, 2013 (18 OF 2013)]; OR 30 ITA NO. 2912 /M/2018 & OTHERS ( B ) BEING A COMPANY, TO WHICH THE 94 [SECOND PROVISO TO SUB - SECTION (1) OF SECTION 129 ] OF THE 93 [COMPANIES ACT, 2013 (18 OF 2013)] IS APPLICABLE, SHALL, FOR THE PURPOSES OF THIS SECTION, PREPARE ITS 91 [STATEMENT OF PROFIT AND LOSS] FOR THE RELEVANT PREVIOUS YEAR IN ACCORDANCE WITH THE PROVISIONS OF THE ACT GOVERNING SUCH COMPANY:] PROVIDED THAT WHILE PREPARING THE ANNUAL ACCOUNTS INCLUDING 91 [STATEMENT OF PROFIT AND LOSS], ( I ) THE ACCOUNTING POLICIES; ( II ) THE ACCOUNTING STANDARDS ADOPTED FOR PREPARING SUCH ACCOUNTS INCLUDING 91 [STATEMENT OF PROFIT AND LOSS]; ( III ) THE METHOD AND RATES ADOPTED FOR CALCULATING THE DEPRECIATION, SHALL BE THE SAME AS HAVE BEEN ADOPTED FOR THE PURPOSE OF PREPARING SUCH ACCOUNTS INCLUDING 95 [STATEMENT OF PROFIT AND LOSS] AND LAID BEFORE THE COMPANY AT ITS ANNUAL GENERAL MEETING IN ACCORDANCE WITH THE PROVISIONS OF 96 [SECTION 129] OF THE 97 [COMPANIES ACT, 2013 (18 OF 2013)] : 35. IT MAY ALSO BE GAINFUL TO REFER TO THE DECISION OF APOLLO TYRES L TD. V/S. CIT (255 ITR 273)(SC) , WHEREIN IT WAS HELD THAT THE AUDITED ACCOUNTS DULY ADOPTED IN ANNUAL GENERAL MEETING CANNOT BE TINKERED WITH FOR COMPUTATION OF BOOK PROFIT OTHER THAN THAT PROVIDED IN THE INCOME TAX ACT, 1961. 36. W E NOTE THAT THE ASSESSEE HAS DULY W ITHDRAWN THE CLA I M OF THE DEPRECIATION UNDER THE NORMAL COMPUTATION. THIS IS VERY MUCH ADMITTED BY THE ASSESSEE. ON THE BASIS OF THIS VERY COMPUTATION OF INCOME, THE A.O. HAS COMPLETED THE ASSESSMENT. HE HAS CONSCIOUSLY NOT DISALLOWED THIS AMOUNT FROM THE COMPUTATION OF THE BOOK PROFIT U/S. 115JB. IN THE CASE OF STATE BANK OF INDIA VS. ACIT (IN WP NO. 271 / 2018 VIDE ORDER D TD 15.06.2018), THE HON'BLE JURISDICTIONAL HIGH COURT HAS HELD THAT WHEN THE A.O. CONSIDERS THE ITEM OF ALLOWANCE ON THE BASIS OF DOCUMENT LIKE THE COMPUTATION OF INCOME, IT CANNOT BE SAID THAT THE SAME IS WITHOUT APPLICATION OF MIND BY THE A.O. HENCE, ADMITTEDLY THE A.O. HAS APPLIED HIS MIND. IT MAY FURTHER BE NOTED THAT THE A.O. DID IN FACT MADE A DISALLOWANCE U/S. 115JB ON ACCOUNT OF PROVISION FOR REDEMPTION OF PREFERENCE SHARES . THIS HE DID BY DISALLOWING THE DEDUCTION CLAIMED BY THE ASSESSEE FROM THE BOOK PROFIT ON THIS ACCOUNT. HENCE, BY NO STRETCH OF IMAGINATION IT CAN BE SAID THAT THE A.O. HAD NOT CONSIDER THE ISSUE OF DISALLOWANCE U/S.115JB IN THE CASE OF THE ASSESSEE. 31 ITA NO. 2912 /M/2018 & OTHERS 37. FURTHER O N THIS ISSUE, WHEN NOTICE WAS ISSUED, THE ASSESSEE HAS REFERRED TO SEVERAL HONBLE APEX COURT DECISION IN THE CASE OF APOLLO TYRES LTD. (SUPRA) AND MALAYALA MANORAMA CO.LTD. (SUPRA) AND S EVERAL DECISION OF HON'BLE JURISDICTIONAL HIGH COURT INCLUDING THAT OF KINETIC MOTAR CO. LTD. (SUPRA) AND ADBHUT TRADING CO. PVT. LTD. (SUPRA) FOR THE PROPOSITION THAT THE ACCOUNTS AUDITED AND ADOPTED IN THE ANNUAL GENERAL MEETING CANNOT BE TINKERED WITH F OR THE COMPUTATION OF BOOK PROFIT U/S. 115JB. THE LD. CIT HAS REFER RED TO THE CERTAIN TRIBUNAL DECISIONS TO OVERCOME THE BINDING DECISIONS OF THE HONBLE APEX COURT AND HON'BLE JURISDICTIONAL HIGH COURT. BE THAT AS IT MAY, DESPITE THAT THE LD. CIT HAS NOT DIRECTED THAT THIS DEPRECIATION BE WITHDRAWN FOR THE PURPOSE OF SECTION 115JB. HENCE, THE A.O.S ORDER IN THIS REGARD IS CORRECT AND LEGALLY PERMISSIBLE. IN ANY CASE, WE FIND THAT IN THE CASE OF MALABAR INDUSTRIAL CO. LTD. (SUPRA), THE HONBLE APEX COURT HAS EXPOUNDED THAT IF THERE ARE TWO VIEWS POSSIBLE AND THE A.O. HAS ADOPTED ONE VIEW, WITH WHICH THE LD. CIT IS NOT IN AGREEMENT, THE ORDER PASSED BY THE A.O. CANNOT BE CONSIDERED TO BE ERRONEOUS IN SOFAR AS IT IS PREJUDICIAL TO THE INTEREST OF THE REVENUE. HENCE, IN OUR CONSIDERED OPINION, ANY ADV ERSE INFERENCE DRAWN BY THE LD. CIT ON THIS ACCOUNT TO EXERCISE JURISDICTION U/S. 263 IS LIABLE TO BE DISMISSED. 38. ANOTHER LIMB OF THE LD. CIT S DISCUSSION IS THAT THE ASSESSEES CLAIM OF WITHDRAWAL FOR BOGUS DEPRECATION HAS BEEN ACCEPTED WITHOUT REFERENCE TO THE SCHEDULE OF ASSETS. HERE WE NOTE THAT THE WITHDRAWAL HAS BEEN LINKED TO THE BOGUS PURCHASES ACCEPTED AND THE FIGURE OF THE BOGUS PURCHAS E AND THE DEPRECIATION WITHDRAWN HAS BEEN BROUGHT OUT IN THE RELEVANT CHART BY THE A.O. AND THE LD. CIT IN HIS ORDER. THE LD. COUNSEL OF THE ASSESSEE HAS CLAIMED THAT THE OBSERVATION IS QUITE CONTRARY TO THE FACTS ON RECORD. W E FIND THAT W HEN THE WITHDRAWA L OF DEPRECIATION HAS BEEN BASED UPON THE IDENTIFIED FIGURES OF BOGUS PURCHASE , THE ACCEPTANCE THEREOF BY THE A.O. CAN BE SAID TO BE AN ERRONEOUS OR NOT AN ACCEPTABLE VIEW. THE ORDER OF THE LD. CIT IN THIS REGARD IS ALSO LIABLE TO BE QUASHED. 32 ITA NO. 2912 /M/2018 & OTHERS 39. NOW WE C OME TO THE OBSERVATION BY THE LD. CIT THAT THE ADDITION FOR BOGUS SHARE APPLICATION COULD HAVE BEEN CONSIDERED U/S. 68. WE FIND THAT AS PER THE MATERIALS, ADMISSION AND SEARCH FINDING THE FUNDS FROM M/S. WELLKNOWN POLYESTERS LTD. IN THE GARB OF FICTION CAPITAL EXPENDITURE HAS BEEN ROUTED BACK AS SHARE CAPITAL IN THE GROUP COMPANIES. 40. BEFORE PROCEEDING FURTHER WE MAY REFER TO THE PROVISION OF SECTION 68 OF THE ACT WHICH READS AS UNDER: CASH CREDITS. 41 68. 42 WHERE ANY SUM IS FOUND CREDITED IN THE BOOKS 43 OF AN ASSESSEE MAINTAINED FOR ANY PREVIOUS YEAR, AND THE ASSESSEE OFFERS NO EXPLANATION 43 ABOUT THE NATURE AND SOURCE THEREOF OR THE EXPLANATION OFFERED BY HIM IS NOT, IN THE OPINION OF THE 44 [ASSESSING] OFFICER, SATISFACTORY, THE SUM SO CREDITED MAY 43 BE CHARGED TO INCOME - TAX AS THE INCOME OF THE ASSESSEE OF THAT PREVIOUS YEAR : 45 [ PROVIDED THAT WHERE THE ASSESSEE IS A COMPANY (NOT BEING A COMPANY IN WHICH THE PUBLIC ARE SUBSTANTIALLY INTERESTED), AND THE SUM SO CREDITED CONSISTS OF SHARE APPLI CATION MONEY, SHARE CAPITAL, SHARE PREMIUM OR ANY SUCH AMOUNT BY WHATEVER NAME CALLED, ANY EXPLANATION OFFERED BY SUCH ASSESSEE - COMPANY SHALL BE DEEMED TO BE NOT SATISFACTORY, UNLESS ( A ) THE PERSON, BEING A RESIDENT IN WHOSE NAME SUCH CREDIT IS RECORDED IN THE BOOKS OF SUCH COMPANY ALSO OFFERS AN EXPLANATION ABOUT THE NATURE AND SOURCE OF SUCH SUM SO CREDITED; AND ( B ) SUCH EXPLANATION IN THE OPINION OF THE ASSESSING OFFICER AFORESAID HAS BEEN FOUND TO BE SATISFACTORY: PROVIDED FURTHER THAT NOTHING CO NTAINED IN THE FIRST PROVISO SHALL APPLY IF THE PERSON, IN WHOSE NAME THE SUM REFERRED TO THEREIN IS RECORDED, IS A VENTURE CAPITAL FUND OR A VENTURE CAPITAL COMPANY AS REFERRED TO IN CLAUSE ( 23FB ) OF SECTION 10.] 41. A READING OF THE ABOVE MAKES IT CLEAR THAT THE SAID SECTION IS APPLICABLE WHERE THE S UM IS FOUND CREDITED IN THE BOOKS OF THE ASSESSEE AND THE ASSESSEE OFFERED NO EXPLANATION ABOUT THE SOURCE THEREOF. HENCE, WE FIND THAT THE SEARCH HAS REVEALED AND THE ASSESSEE HAS DULY EXPLAINED THE CAPITA L EXPENSES PURCHASED WERE BOGUS IN THE BOOKS OF M/S. WELLKNOWN POLYESTERS LTD. , THE AMOUNT IN THIS REGARD WAS ROUTED THROUGH M/S. WELLKNOWN POLYESTERS LTD. TO FICTITIOUS SHELL COMPANIES AND THEREAFTER RATING THE SAME AS 33 ITA NO. 2912 /M/2018 & OTHERS BOGUS SHARE CAPITAL CONTRIBUTION TO TH E GROUP COMPANIES. THE ENTIRE DETAIL IS AVAILABLE IN THE ASSESSMENT ORDER. IN THIS FACTUAL BACKGROUND THE A.O. HAS HELD THAT NO OTHER ADDITION AFTER WITHDRAWAL OF BOGUS DEPRECIATION CLAIM IS TO BE DONE. 42. IN THE BACKGROUND OF THE MODUS OPERANDI AS NOTED HEREINABOVE, THE LD. CIT IS OF THE OPINION THAT THE A.O. HAS ACCEPTED THE SAME ON FACE VALUE WITHOUT CONDUCTING ANY ENQUIRY AS TO HOW BOTH ARE LINKED BY WAY OF DIRECT NEXUS. IN OTHER WORDS, THE LD. CIT IS SU GGESTING THAT IF THE SUMS PLOUGHED BACK IN THE FORM OF SHARE CAPITAL ARE NOT LINKED TO THE FICTITIOUS CAPITAL EXPENDITURE BOOKED BY M/S. WELLKNOWN POLYESTERS LTD., THE SAME SHOULD HAVE BEEN CONSIDERED FOR ADDITION U/S. 68. FIRSTLY, IN THIS REGARD, WE NOTE THAT THE OUTFLOW IN THE FORM OF CAPITAL EXPENDITURE AND INFLOW IN THE FORM OF BOGUS CAPITAL HAS BEEN DULY RECONCILED AND NOTHING ADVERSE IS NOTED BY THE A.O. OR THE INVESTIGATION WING. FURTHER, WE NOTE THAT THE CONSIDERATION OF OVERALL FACTS IN THE CASE IN DICATE THAT ON THE ONE HAND THERE WERE FICTITIOUS ASSETS IN THE BALANCE SHEET OF M/S. WELLKNOWN POLYESTERS LTD., AND ON THE OTHER HAND THE CONSIDERATION FOR THIS FICTITIOUS ASSET HAS COME TO THE GROUP COMPANIES IN THE FORM OF SHARE CAPITAL AND SHARE PREMIU M TH R OUGH SHE LL COMPANIES. HENCE, NO FURTHER ADDITION HAS BEEN DONE IN THE ASSESSMENT. THUS, O N THE ONE HAND , THERE WERE FICTITIOUS ASSET OF M/S. WELLKNOWN POLYESTERS LTD. AND , ON THE OTHER HAND , THERE WERE FICTITIOUS CAPITAL/LIABILITY ROUTED FROM M/S. WEL LKNOWN POLYESTERS LTD. ITSELF. IN THIS SCENARIO , WHEN THE ASSESSEE HAS WITHDRAWN THE FICTITIOUS DEPRECIATION CLAIMED IN THE CASE OF M/S. WELLKNOWN POLYESTERS LTD. , THE A.O. HAS NOTED THE MODUS OPERANDI AND THE LIST OF THE SHELL COMPANY AND HAS NOT MADE ANY ADDITION U/S. 68 AND HAS MENTIONED IT CLEARLY . THIS IS CLEARLY AND LEGALLY A PERMISSIBLE VIEW AS THE FICTITIOUS ASSET AT ONE SIDE OF BALANCE SHEET OF GROUP COMPANY IS REPRESENTED BY THE FICTITIOUS CAPITAL COMING FROM THE SAME 34 ITA NO. 2912 /M/2018 & OTHERS SOURCE WHICH IS ACCEPTED BY THE ASSESSEE GROUP COMPANY TO BE RELATED TO THE FICTITIOUS CAPITAL PURCHASED. NOW THE LD. CIT IS SAYING THAT THE A.O. SHOULD NOT HAVE ACCEPTED THE ADMISSION BY THE ASSESSEE GROUP. HE SHOULD HAVE MADE FURTHER DETAILED ENQUIR Y WHETHER TH E BOGUS SHARE CAPITAL INTRODUCED WAS ACTUALLY SOURCED FROM THE FICTITIOUS CAPITAL PURCHASE BOOKED IN THE NAME OF M/S. WELLKNOWN POLYESTERS LTD. HE HAS ALSO OPINED THAT THE A.O. SHOULD HAVE REJECTED THE BOOK. 43. WE FIND THAT F IRSTLY IF THE A.O. HAS REJEC TED THE BOOKS OF M/S. WELLKNOWN POLYESTERS LTD. THEN THE ADDITION ON ACCOUNT OF BOGUS DEPRECATION WITHDRAWN WILL ITSELF WOULD COME UNDER CLOUD. AS IT IS SETTLED THAT WHEN THE BOOKS ARE REJECTED, E STIMATED ADDITION IN PART CAN BE BASED ON POST PROFIT OR INDUSTRY PREVAILING RATE. THEN THERE WILL BE NO CASE OF MAKING FURTHER ADDITION BASED UPON THE FIGURES OF THE SAME BOOKS. FURTHER AS NOTED ABOVE, SECTION 153A ASSESSMENT ORDER PASSED BY THE A.O. HAS BEEN THE SUBJECT MATTER OF APPEAL BEFORE THE LD. CIT (A) AND THE ITAT. IN SUCH FACTUAL SCENARIO, IT IS NOT LEGALLY PERMISSIBLE FOR THE LD. CIT TO SUGGEST THAT THE BOOKS OF THE ASSESSEE SHOULD HAVE BEEN REJECTED BY THE A.O. SECTION 263(1) SUB CLAUSE (C) MAKES IT CLEAR THAT THE LD. CI T IN SECTION 263 HAS NO JURISDICTION ON MATTERS WHICH ARE UNDER CONSIDERATION OF THE LD. CIT(A). 44. FURTHERMORE, WE FIND THAT NO MATERIAL PERTAINING TO INTRODUCTION OF SHARE CAPITAL FROM OTHER SOURCES HAVE BEEN FOUND IN THE SEARCH OR HAVE COME OUT AS A R ESULT OF INVESTIGATION NOR THE SAME IS BROUGHT ON RECORD. AS SUBMITTED BY THE LEARNED COUNSEL OF THE ASSESSEE EXCEPT FOR THE MATERIAL FOUND FROM M/S. WEL L KNOWN POLYESTERS LTD. REGARDING BOGUS CAPITAL EXPENDITURE BOOKING AND THE ADMISSION BY THE ASSESSEE CO MPANY 35 ITA NO. 2912 /M/2018 & OTHERS OF ROUTING IT BACK TO THE GROUP COMPANIES THERE WAS NO MATERIAL FOUND. IN SUCH SITUATION , IN OUR CONSIDERED OPINION , TH ERE WAS NEITHER ANY REASON NO R ANY JUSTIFI CATION ON THE PART OF THE A.O. TO FURTHER MAKE DETAIL ED ENQUIRY FOR THE SOURCE OF SHARE CAPITAL. IT IS SETTLED LAW NOW THAT DEHOR S E ANY INCRIMINATI NG MATERIA L FOUND DURING SEARCH ADDITION MADE U /S. 1 5 3A ARE NOT SUS TAINABLE. IN THIS REGARD, WE NOTE THAT IN THE ASSESSMENT U/S.153A AS NOTED ABOVE IN THE CASE OF M/ S.WELLKNOWN POLYESTERS LTD., THE A.O. HAS ALSO MADE SOME OTHER ADDITION DE HORS ANY INCRIMINATING MATERIAL FOUND DURING SEARCH. THE SAME WERE DELETED BY THE LD. CIT AND CONFIRMED BY THE ITAT BASED UPON THE DECISION OF THE HON'BLE JURISDICTIONAL HIGH COURT IN THE CASE OF CONTINENTAL WAREHOUSING CORPORATION (NHAVA SHEVA) LTD. (SUPRA). FURTHERMORE , WE NOTE TH AT IN THE CASE OF M/S. WELLKNOWN T ECHNOLOGIES IN THE A SSESSMENT U /S.143 (3) OF THE A CT FOR THE A.Y. 2009 - 10, THE ADDITION S FOR INTRODUCTION OF BOGUS SHARE CAPITAL WAS MADE. TH ESE WERE DULY DELETED BY THE L D. CIT. TH E MATTER HAD TRAVELLED TO THE 1TAT. THE ITAT VIDE ORDER DATED 21.12.2015 HAS DULY CONF IRMED THE DELETION. HENCE , WHEN T HE ISSUE OF BOGUS SHARE CAPITAL FROM OTHER SOURCES WAS ALREADY EXAMINE D BY TH E A.O. AND THE MATTER WAS CONCLUDED AT THE LEVEL OF ITAT, THERE WAS NO JURISDICTION FOR THE L D CIT TO PASS AN ORDER U /S. 263 ON THE SAME ISSUE. IN THIS REGARD , WE NOTE THAT SECTION 263 (1) SUB CLAUSE ( C ) DOESN'T MANDATE THE LD. CIT TO EXERCISE JURISDICTION ON SUCH MATTERS WH ICH ARE UNDER CONS IDERATION BY THE LD. CIT (A) . HENCE, SUCH ISSUES HAVE BEEN TAKEN OUT OF JURISDICTION OF SECTION 263 BY THIS A CT. IN THE P RESENT CASE, AS NOTED ABOVE THIS MATTER HAS EVEN BEEN CONCLUDED BY THE LD. CIT AND T HE ITAT IN THE CASE OF M/S. WELL - KNOWN T ECHNOLOGIES AS ABOVE. 36 ITA NO. 2912 /M/2018 & OTHERS 45. HENCE, THE A.O. HAS TAKEN A LEGALLY CORRECT AND PERMISSIBLE VIEW BY NOT CONSIDERING ANY OTHER ADDITION WITH REGARD TO THE SHARE CAPITAL. IN ANY CASE, I N THE BACKGROUND OF THE A FORESAID DISCUSSION, WE ARE OF THE CONSIDERED OPINION THAT THE VIEW OF THE A.O. THAT NO ADDITION IN THIS REGARD IS WARRANTED U/S. 153A ASSESSMENT IN THE FACTS AND CIRCUMSTANCES OF THESE CASES CANNOT BE SAID TO BE A VIEW WHICH IS NOT POSSIBLE. IN THIS VIEW OF THE MATTER ON THE TOUCHSTONE OF THE HONBLE APEX COURT IN THE CASE OF MALABAR INDUSTRIAL CO. LTD. ( SUPRA ) AND THE HONBLE APEX COURT DECISION IN THE CASE OF MAX INDIA LTD. ( SUPRA ) , THE ORDER PASSED BY THE LD. CIT IS LIABLE TO BE QUASHED. 46. AS REGARDS THE CASE LAW REFERRED BY THE LD. COUNSEL OF THE DEPARTMENT FROM THE HONBLE APEX COURT ABOVE IS CONCERNED, IN O UR CONSIDERED OPINION THAT THE SAME IS NOT AT ALL APPLICABLE ON THE FACTS OF THE PRESENT CASE. IN THE SAID CASE BEFORE THE HONBLE APEX COURT TH E A.O. HAD ACCEPTED THE GENUINENESS OF BOGUS SHARE CAPITAL WITHOUT MAKING PROPER ENQUIRY. IN THE PRESENT CASE, THE ASSESSEE HAS HIMSELF ADMITTED THAT THE SHARE CAPITAL WAS BOGUS. HENCE, THIS CASE LAW IS NOT APPLICABLE ON THE FACTS OF THE PRESENT CASE. 47 . IN THE BACKGROUND OF THE AFORESAID DISCUSSION AND PRECEDENT, WE ARE OF THE CONSIDERED OPINION THAT THE VIEW ADOPTED BY THE A.O. IS A LEGALLY PERMISSIBLE POSSIBLE ONE AND IF THE LD. CIT IS NOT IN AGREEMENT THEREWITH, THE SAME SHALL NOT GAVE RISE TO THE JU RISDICTION BY THE LD. CIT TO HOLD THE ORDER OF THE A.O IS ERRONEOUS INSOFAR AS IT IS PREJUDICIAL TO THE INTEREST OF THE REVENUE. HENCE, THE ORDERS BY THE LD. CIT IN ALL THESE CASES ARE QUASHED. 37 ITA NO. 2912 /M/2018 & OTHERS 48. IN THE RESULT, ALL THE APPEALS FILED BY THE ASSESSEE S ARE ALLOWED. ORDER PRONOUNCED IN THE OPEN COURT ON 0 3 . 1 2 . 2 0 1 8 S D / - S D / - ( PAWAN SINGH ) (SHAMIM YAHYA) JUDICIAL MEMBER ACCOUNTANT MEMBER MUMBAI ; DATED : 0 3 . 1 2 . 2 0 1 8 ROSHANI , SR. PS COPY OF THE ORDER FORWARDED TO : 1. THE APPELLANT 2. THE RESPONDENT 3. THE CIT(A) 4. CIT - CONCERNED 5. DR, ITAT, MUMBAI 6. GUARD FILE BY ORDER, (DY./ASSTT. REGISTRAR) ITAT, MUMBAI