M/s. Dwarkadhis Buildwell Pvt. Ltd., Bhiwani V. CIT, Hisar

ITA 3097/DEL/2014

• Counselvise Citation: [2019] 117 COUNSELVISE.COM (IT) 0311 (ITAT-DELHI)
• Duration Of Justice: 5 year(s) 1 month(s) 13 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 01-07-2019
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: B
• Next Hearing Date: 06-06-2017
• Assessment Year: 2006-2007
• Appeal Filed On: 19-05-2014
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: NIDHI SRIVASTAVA
• Keywords: Bogus Share capital; Income from undisclosed sources; Opportunity of being heard; Audit objection; Principle of natural justice; Initiation of penalty proceedings; Accommodation entries; Prejudicial to interest; Tax effect; Capital receipt; Revenue expenditure; Reassessment proceedings; Set aside
• Section: 143(3); 133A; 195; 147; 148; 263; 154; 139

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL DELHI BENCH B, NEW DELHI BEFORE SH. R. K. PANDA, ACCOUNTANT MEMBER AND SH. KULDIP SINGH, JUDICIAL MEMBER ITA NO.3097/DEL/2014 ASSESSMENT YEAR: 2006-07 DWARKADHIS BUILDWELL PVT. LTD C/O N. K. JAIN, ADVOCATE NAYA BAZAR, BHIWANI PAN NO. AACCD1951E VS CIT HISAR (APPELLANT) (RESPONDENT) APPELLANT BY SHRI NAVEEN GUPTA CA SHRI ASHU GOYAL, CA SH. ASHOK KUMAR JAIN, CA RESPONDENT BY MS. NIDHI SRIVASTAVA, CIT DR DATE OF HEARING: 16/04/2019 DATE OF PRONOUNCEMENT: 01/07/2019 ORDER PER R.K. PANDA, AM: THIS APPEAL FILED BY THE ASSESSEE IS DIRECTED AGAIN ST THE ORDER DATED 21.03.2014 PASED U/S. 263 OF THE IT ACT , 1961 BY THE CIT, HISAR RELATING TO A. Y. 2006-07. 2. FACTS OF THE CASE, IN BRIEF, ARE THAT THE ASSESS EE IS A COMPANY AND FILED ITS RETURN OF INCOME ON 11.10.200 6 DECLARING NIL INCOME. THE ORIGINAL ASSESSMENT IN THIS CASE W AS COMPLETED PAGE | 2 BY THE ITO, WARD-1, BHIWANI ACCEPTING THE RETURNED INCOME U/S. 143 (3) VIDE ORDER DATED 31.12.2008. SUBSEQUENTLY THE CASE OF THE ASSESSEE WAS REOPENED AFTER RECORDING THE FOLLO WING REASONS :- ORIGINAL ASSESSMENT IN THIS CASE WAS COMPLETED BY THE ITO, WARD-1, BHIWANI ACCEPTING THE 'RETURNED INCOME U/S 143(3) VIDE HIS ORDER DATED 31.12.2008. ON 11.11.2008 A SEARCH & SE IZURE OPERATION WAS CONDUCTED AT THE PREMISES OF THE ASSE SSEE COMPANY. AT THE TIME OF SURVEY, THE ASSESSEE HAD SURRENDERED A SUM OF RS. 7 CRORE AS MENTIONED AT PAGE NO. 5 OF THE SURVEY REPO RT WHICH IS RELEVANT FAR THE FINANCIAL YEAR 2008-09 I.E. ASSESS MENT, YEAR 2009- 10. THE ASSESSEE PAID TAXES THEREON AT DELHI. OUT O F TOTAL TAX LIABILITY ON THE SURRENDERED AMOUNT OF RS. .7 CRORE FOR F.Y. 2008-09 RELEVANT TO ASSTT. YEAR 2009-10, THE ASSESSEE HAS A LREADY PAID RS. 1 CRORE OF INCOME TAX (RS. 50 LAKH VIDE BSR CODE 03 02275 CHNLLAN SR. NO. 00571 DATED 12.12.2008 AND RS. 50 LAKH VIDE BSR CODE 0302275 CHAIKIN NO. 00144 DATED 31.01.2009} FROM THE PERUSAL OF THE DOCUMENTS FOUND AND IMPOUND ED FROM THE OFFICE OF M/S DWARKADHIS BUILDWELL PVT. LTD. AT BN 57 EAST, SHALIMAR BAGH, NEW DELHI, DURING THE COURSE OF SURV EY OPERATION UNDER SECTION 133A OF THE INCOME TAX ACT, 1961, IT REVEALS THAT THE ASSESSEE HAS RECEIVED SHARE CAPITAL AT HUGE PREMIUM FROM A NUMBER OF COMPANIES IN THE F.Y. 2005-06. MOST OF TH ESE COMPANIES HAVE ADDRESS AT 13/34 WEA, KAROL BAGH, WHICH IS CON TROLLED BY SHRI TARUN GOEL WHO IS AN ENTRY OPERATOR AS ESTABLI SHED BY THE SEARCH & SEIZURE OPERATION CONDUCTED BY THE UNIT IV OF DIT (INV.) ON 15.09.2008. M/S DWARKADHIS BUILDWELL PVT. LTD. HAS 710000 SHARES OF RS. 7.10 CRORE. TH'E WHOLE OF THE SHARE C APITAL PERTAINS TO THE FINANCIAL YEAR 2005-06 RELEVANT TO ASSESSMENT Y EAR 2006-07. A SEARCH. & SEIZURE OPERATION WAS CONDUCTED AGAINST SHRI TARUN GOYAL & OTHERS AT 13/34 WEA, ARYA SAMAJ ROAD, KAROL BAGH, PAGE | 3 NEW DELHI ON 15.09.2008 BY UNIT IV(1) OF DIRECTORAT E OF INCOME TAX INVESTIGATION, NEW DELHI, DURING THE SEARCH AND SEI ZURE OPERATION AND POST SEARCH ENQUIRIES THE STATEMENTS UNDER OATH OF THE FOLLOWING DIRECTORS OF THE ABOVE MENTIONED COMPANIES WERE REC ORDED, WHICH HAVE BEEN MADE AS ANNEXURES, I.E. SHRI TARUN GOYAL, SHRI FRAMED KUMAR, SHRI HARPREET SINGH, SMT. USHA RANI & SMT. R ITU SAXENA. SUMMONS WERE ALSO ISSUED TO THE OTHER DIRECTORS OF THE ABOVE MENTIONED COMPANIES, BUT NONE OF THE DIRECTORS WERE FOUND ON THE GIVEN ADDRESSES. SH. TARUN GOYAL WAS ALSO ASKED TO PRODUCE THE DIRECTORS' OF THE ABOVE MENTIONED COMPANIES BUT HE ALSO FAILED TO PRODUCE ANY DIRECTOR. THE STATEMENTS OF THE DIRECTORS OF THE ABOVE MENTIO NED COMPANIES CLEARLY ESTABLISHED THAT THE DIRECTORS OF THE COMPANIES WERE EMPLOYEES OF SH TARUN GOEL AND THEY HAD NO KNOWLEDGE OF THE FINANCES OF THE COMPANIES. THEY HA VE AGREED THAT THEY USED TO SIGN THE CHEQUE BOOKS ON THE DIRE CTION OF SH. TARUN GOEL AND THEY WERE NOT AWARE ABOUT THE USE OF THOSE CHEQUES OR ABOUT THE PURPOSES OR THE PARTIES TO WHO M THESE CHEQUES WERE GIVEN. SH TARUN GOEL IN HIS STATEMENT HAS ADMITTED THAT HE WAS USING SOME OF THE ABOVE MENTIO NED COMPANIES FOR PROVIDING ACCOMMODATION ENTRIES. IT WOULD BE RELEVANT, TO POINT OUT HERE THAT IN THE ACCOUNT OF OPENING FORMS OF SOME COMPANIES, THE PHOTOGRAPHS OF SMT. USHA RANI WAS PASTED AGAINST VARIOUS NAMES LIKE USHA GOY AL, USHA SHARMA, URVASHI SINGH. IN HER STATEMENT UNDER OATH. SMT USHA RANI ADMITTED THAT IT WAS ONLY HER PHOTOGRAPH AGAIN ST SEVERAL NAMES. IT INDICATES THAT THERE ARE SEVERAL DIRECTOR S WHICH ARE NON-EXISTENT. PAGE | 4 BASED ON THE ABOVE FACTS IT IS EVIDENT THAT SH. TAR UN GOEL IS AN ENTRY OPERATOR AND HAS GIVEN ACCOMMODATION EN TRIES TO VARIOUS PERSONS AND CONCERNS. THEREFORE, THE SHARE CAPITAL RECEIVED BY M/S DWARKADHIS BUILDWELL PVT LTD FROM T HE ABOVE MENTIONED COMPANIES CONTROLLED BY SH. TARUN GOYAL A RE IN FACT ACCOMMODATION ENTRIES AND FORM PART OF ITS UNACCOUN TED INCOME FOR THE FINANCIAL YEAR 2005-0G. FROM- THE FINDING OF SEARCH, IT IS EVIDENT AND UNDE NIABLE THAT ALL THE COMPANIES BELONGED TO SHRI TARUN GOYAL AND WERE FICTITIOUS. HE HAS MADE AN ANNEXURE OF SUCH BENEFIC IARY COMPANIES AND M/S DWARKADHIS BUILDWELL P LTD. IS ON E OF THEM WHERE AN AMOUNT OF RS. 7.10 CRORE RELEVANT FOR ASSE SSMENT YEAR 2006-07 HAS BEEN TAKEN BY THIS COMPANY FROM THE FOL LOWING ENTRY PROVIDER COMPANIES MAIN ARYN STTMUJ ROAD. KAROL BAGH. 5 CORPORATE FINLEASE PVT. LTD. 13/34, WEA, ARYA SAMAJ ROAD 5500000 6 7 DEEP SEA DRILLING PVT. LTD. 13/34, WEA, ARYA SAMAJ ROAD, KAROL BAGH, 5500000 D U SECURITIES PVT. LTD. 13/34, WEA, ARYA SANIAJ ROAD, . KAROL BAGH, 3000000 8. EBONY INVESTMENT PVT. LTD. 13/34, WEA, ARYA SAMAJ ROAD, KAROL BAGH, 2500000 9. KAROL BAGH TRADING LTD. 203 DHAKA CHAMBERS, 2069/39, NAIVVALA, KAROL BAGH, NEW DELHI 5000000 10 . MERTA FINANCE LTD. 13/34, WEA, ARYA SAMAJ ROAD, KAROL BAGH, 5000000 11 . SADGURU FINMIN PVT. LTD. 13/34. WEA, ARYA SAMAJ ROAD, KAROL BAGH, 5000000 12 . SAI DWARKA FINMAN PVT. LTD. 13/34, WEI, 4' 1 FLOOR, MAIN ARYA SAMAJ ROAD, KAROL BAGH, 5000000 13 . TAURUS IRON & STEEL CO PVT. LTD. GOHANA DISTT SONEPAT 3000000 14 . TEJASVI INVESTMENT PVT. LTD. GOHANA DISTT. SONEPAT 5000000 SR. NO. NAME OF THE ENTRY PROVIDER COMPANY AMOUNT OF SHARE APPLICATION MONEY (IN RS.) 1. ADONIS FINANCIAL SERVICES PVT, LTD. 13/34, WEA, ARY A SAMAJ ROAD, KAROL BAGH, 2500000 2. ARIES CRAFTS PVT. LTD, 13/34, WEA, ARYA SAMAJ ROAD, KAROL BAGH, 5000000 3. BHAWANI PORTFOLIO PVT. LTD, 13/34, WEA, ARYA SAIHAJ ROAD, KAMI BAGH, 3000000 4. CAMPARI FISCAL SERVICES PVT. LTD. 13/34, WEI, 4 FL OOR, 6000000 PAGE | 5 15 . THAR STEEL PVT. LTD. 13/34, WEA, .ARYA SAMAJ ROAD, KAROL BAGH, 4500000 16 . VOLGA CRESEC PVT. LTD. 13/34, WEA, ARYA SAMAJ ROAD, KAROL BAGH, 5500000 TOTAL 71000000 IN THIS WAY, THE ASSESSEE HAS INCREASED HIS SHARE APPLICATION MONEY THROUGH, THESE ACCOMMODATION ENTR IES. IN FACT ACCOMMODATION ENTRIES ARE TO THE TUNE OF RS, 7.10 C RORES FORMING PART OF ITS UNACCOUNTED INCOME FOR THE FINANCIAL YE AR 2005-06 RELEVANT TO ASSTT. YEAR 2006-07 WHICH HAS ESCAPED A SSESSMENT. I HAVE THEREFORE, REASONS TO BELIEVE THAT INCOME OF RS 7,10,00,000/- HAS ESCAPED ASSESSMENT FOR THE ASSTT. YEAR 2006- 07 AND ALSO ANY OTHER INCOME- CHARGEABLE TO TAX WHI CH HAS ESCAPED ASSESSMENT AND WHICH COMES TO THE NOTICE OF S THE AO SUBSEQUENTLY IN THE COURSE OF PROCEEDINGS- UNDER TH IS, SECTION. ISSUE NOTICE U/S. 148 OF THE INCOME TAX ACT, 1961. 3. THE ASSESSING OFFICER COMPLETED THE RE-ASSESSMEN T PROCEEDINGS U/S. 143 (3)/147 ON 13.12.2011 AT THE R ETURNED INCOME WITHOUT MAKING ANY ADDITION. WHILE DOING SO HE ACCEPTED THE PLEA OF THE ASSESSEE ON THE BASIS OF VARIOUS DE CISIONS INCLUDING THE DECISION OF HONBLE SUPREME COURT IN THE CASE OF CIT VS. LOVELY EXPORTS (P) LTD REPORTED IN 216 CTR 195 THAT IF THE IDENTITY OF THE INVESTORS IS ESTABLISHED, THE ASSES SMENT IN THE CASE OF THE INVESTORS CAN BE RE-OPENED AS PER LAW BUT NO ADDITION CAN BE MADE IN THE HANDS OF THE COMPANY WHO HAS RECEIVE D THE SHARE PAGE | 6 APPLICATION MONEY. HE ACCORDINGLY DROPPED THE PROCE EDINGS INITIATED U/S. 147 OF THE IT ACT, 1961 AND ACCEPTED THE RETURNED INCOME. 4. THE LD. CIT CALLED FOR THE RECORD AND EXAMINED T HE SAME AND NOTED THAT ASSESSEE, DURING THE COURSE OF ASSES SMENT PROCEEDINGS, HAD STATED THAT THESE INVESTOR COMPANI ES WERE INCORPORATED UNDER THE COMPANIES ACT AND HAVE BEEN MAINTAINING BANK ACCOUNTS AND THE STATEMENTS OF BAN K ACCOUNTS ALONGWITH COPIES OF PAN WERE FURNISHED AS EVIDENCE OF IDENTITY OF THE INVESTORS. THE ASSESSEE COMPANY HAD ARGUED THAT IT RECEIVED SHARE APPLICATION MONEY THROUGH BANKING CHANNEL AND HENCE THE TRANSACTIONS WERE CLAIMED TO BE GENUINE. THE ASSES SEE COMPANY RELIED UPON THE JUDGMENT OF HONBLE SUPREME COURT I N THE CASE OF LOVELY EXPORTS LTD. (2008) 216 CTR 195 6DTR (SC) 3 08 IN SUPPORT OF ITS CLAIM. ASSESSEE FURTHER STATED THAT IF IDENTITY OF THE INVESTOR IS ESTABLISHED, THE ASSESSMENT IN THE CASE OF INVESTORS CAN BE REOPENED AS PER LAW, BUT NO ADDITION CAN BE MADE IN THE HANDS OF THE COMPANY WHO HAS RECEIVED THE SHARE APP LICATION MONEY. 5. ACCORDING TO LD. CIT THE ASSESSING OFFICER DID N OT MAKE ANY INVESTIGATION/ VERIFICATION WITH REGARD TO THE GENU INENESS OF THE IDENTITY OF THE INVESTOR COMPANIES INSPITE OF THE F ACT THAT THE RECORD HAD SUFFICIENT MATERIAL WHICH NECESSITATED F URTHER ENQUIRIES. ACCORDING TO THE LD. CIT, THE RATIO OF T HE DECISION OF HONBLE SUPREME COURT WAS EXAMINED SUBSEQUENTLY BY VARIOUS COURTS INCLUDING, THE HONBLE DELHI HIGH COURT IN T HE CASE OF CIT VS. NOVA PROMOTERS & FINLEASE (P) LTD REPORTED IN 3 42 ITR 169. PAGE | 7 ALTHOUGH IN NORMAL COURSE, ADDITION CAN BE MADE ONL Y IN THE HANDS OF THE INVESTORS, HOWEVER, IN THIS CASE, THES E SHARE HOLDERS/ INVESTORS ARE NOT DOING ANY REAL BUSINESS BUT ARE BEING USED AS A VEHICLE TO LAUNDER BLACK MONEY. HE, THER EFORE, ISSUED A SHOW CAUSE NOTICE U/S 263 (1) ASKING THE ASSESSEE T O EXPLAIN AS TO WHY THE ORDER PASSED BY THE ASSESSING OFFICER SH OULD NOT BE SET ASIDE SINCE THE ORDER PASSED BY THE ASSESSING O FFICER IS ERRONEOUS AND PREJUDICIAL TO THE INTEREST OF THE RE VENUE. 6. REJECTING THE VARIOUS EXPLANATION GIVEN BY THE A SSESSEE AND OBSERVING THAT THE ASSESSING OFFICER FAILED TO COND UCT FURTHER ENQUIRIES WHICH WERE NECESSARY TO GATHER RELEVANT M ATERIAL, THE LD. CIT SET ASIDE THE ASSESSMENT AND DIRECTED THE A O TO MAKE FRESH ASSESSMENT AFTER GATHERING RELEVANT MATERIAL BY MAKING PROPER/ NECESSARY ENQUIRIES/ INVESTIGATIONS. THE RE LEVANT OBSERVATION OF THE CIT AT PARA 12.1 AND 12.2 OF HIS ORDER READS AS UNDER :- 12.1 IN VIEW OF DISCUSSION MADE IN ABOVE PARAS, I AM OF THE CONSIDERED OPINION THAT THE A.O. OUGHT TO HAVE APPRECIATED THE EVIDENC E GATHERED BY THE INVESTIGATION WING AND FOLLOWED A COURSE TO CONFRONT THESE EVIDEN CES TO THE ASSESSEE, INCLUDING CONDUCTING F URTHER ENQUIRIES WHICH WERE NECESSARY TO GATHER RELEVANT MATERIAL WHICH AO FAILED TO DO. THERE HAS BEEN NON-APPLICATION OF MIND ON THE PART OF THE A.O. IN NOT APPRECIATING THE MATERIAL ON RECORD AS WELL AS IN NOT FOLLOWING COURSE OF FURTHER INQUIRY TO GATHER RELEVANT MATERIAL. ALSO, THERE IS FAILURE ON PART OF THE A.O. TO APPLY PROVISIONS OF THE LAW, CORRECTLY. THEREFORE, ASSESS MENT ORDER PASSED BY THE A.O. IS HELD AS ERRONEOUS AND PREJUDICIAL TO THE INTEREST O F REVENUE IN RESPECT OF AFORESAID ISSUES. HAD THE CONSEQUENT ADDITIONS BEEN MADE, THE RE WOULD HAVE BEEN SUBSTANTIAL TAX EFFECT AND THUS THE CAUSE OF THE REVENUE HAS SU FFERED. FURTHER, THE IMPUGNED ORDER OF THE ASSESSING OFFICER IS ERRONEOUS AND PRE JUDICIAL TO THE INTEREST OF THE REVENUE IN RESPECT OF AFORESAID ISSUES. HAD THE CO NSEQUENT ADDITIONS BEEN MADE, PAGE | 8 THERE WOULD HAVE BEEN SUBSTANTIAL TAX EFFECT AND TH US THE CAUSE OF THE REVENUE HAS SUFFERED. FURTHER, THE IMPUGNED ORDER OF THE ASSES SING OFFICER IS ERRONEOUS IN SO FAR AS IT IS PREJUDICIAL TO THE INTEREST OF THE REVENUE AS IT IS IN CLEAR VIOLATION OF THE LEGAL PROVISIONS CONTAINED IN THE INCOME TAX ACT, 1961. T HUS, THE VALIDITY / SANCTITY OF THE LEGAL PROVISIONS OF THE ACT, HAS BEEN ERODED AND IT MAY SERVE AS A BAD PRECEDENT. THE REVENUE LOSS ALSO ARISES AS THE CONSEQUENT ADDI TIONS COULD HAVE GIVEN RISE TO THE OCCASION OF INITIATION OF PENALTY PROCEEDINGS UNDER SECTION 271(1) (C) OF THE INCOME TAX ACT, 1961, FOR FURNISHING OF INACCURATE PARTICU LARS OF ITS INCOME AND CONCEALMENT OF INCOME IN RESPECT OF ABOVE STATED IS SUES. 12.2. THE ASSESSMENT ORDER IS, THEREFORE, SET ASIDE U/S. 263 91) OF THE INCOME TAX ACT, 1961 TO THE ABOVE STATED EXTENT. THE AFOREMEN TIONED ISSUES ARE RESTORED BACK TO THE FILE OF THE ASSESSING OFFICER. THE AO IS DI RECTED TO MAKE FRESH ASSESSMENT AFTER GATHERING RELEVANT MATERIAL BY MAKING NECESSA RY AND PROPER INQUIRIES / INVESTIGATION, IN THE LIGHT OF DISCUSSIONS MADE IN THE PRECEDING PARAS (BUT NOT NECESSARILY LIMITING TO THE SAME) AND MAKE A JUDICI OUS AND LOGICAL ORDER AS PER LAW, PROVIDING OPPORTUNITY OF BEING HEARD TO THE AS SESSEE. OF COURSE, ANY ADVERSE INFERENCE MADE WOULD REQUIRE RECOMPUTATION OF INCOM E AND TAX THEREON. 7. AGGRIEVED WITH SUCH ORDER OF THE CIT, THE ASSESS EE IS IN APPEAL BEFORE THE TRIBUNAL BY RAISING FOLLOWING GRO UNDS :- 1. THAT THE ORDER OF ACIT, CIRCLE BHIWANI U/S 143(3)/147 DATED 13.12.2011 ITSELF IS VOID AB INITI O, ILLEGAL AND WITHOUT JURISDICTION BEING CONTRARY TO PROVISIONS OF LAW, BASED ON SURMISES AND CONJECTURE S. AS SUCH ACTION OF LD CIT HISAR FOR SETTING ASIDE O RDER WHICH IS VOID AB INITIO OR NON EST ORDER BY INITIAT ING THE PROCEEDINGS U/S 263 IS WITHOUT JURISDICTION AND LIA BLE TO BE UNDONE. 2. THAT THE ORDER OF LD COMMISSIONER OF INCOME TAX HISAR IS AGAINST THE LAW, FACTS, CIRCUMSTANCES, PAGE | 9 NATURAL JUSTICE AND ALL OTHER PRINCIPLES AND RULES OF LAW AS SUCH IS LIABLE TO BE QUASHED. 3. THAT LD COMMISSIONER OF INCOME TAX HISAR ERRED IN SETTING ASIDE THE ORDER PASSED U/S 147 R.W .S 143(3) DATED 13.12.2011 EVEN THOUGH THE CONDITIONS PRECEDENT FOR VALIDITY EXCISING HIS JURISDICTION U/ S 263 WERE NOT SATISFIED. 4. THAT WHEN LD AO DROPPED THE PROCEEDINGS INITIATED BY HIM U/S 147 AFTER CONSIDERING ASSESSEE S OBJECTIONS AND SUBMISSION AND SHOW CAUSE NOTICE ISSUED BY LD CIT HISAR DOES NOT TAKE INTO ACCOUNT VALIDITY OF THE JURISDICTION ASSUMED BY LD AO AS PE R LAW AND TALKS ABOUT ONLY LACK OF INQUIRY AND INVESTIGAT ION ON MERITS THEN ORDER PASSED U/S 263 WITHOUT SETTING AS IDE THE PROCEEDINGS INITIATED U/S 147 DROPPED BY LD AO BY STATING IN THE ORDER THAT THEREFORE THE PROCEEDING S INITIATED U/S 147 BY ISSUING NOTICE U/S 148 TO THE ASSESSEE ARE HEREBY DROPPED IS LIABLE TO BE QUASHE D. 5. THAT THE LD COMMISSIONER OF INCOME TAX HISAR FAILED TO APPRECIATE THE FACT THAT THE LD AO DROPPE D THE PROCEEDINGS INITIATED U/S 147 READ WITH SEC 148 ON A POSSIBLE VIEW, THAT THE FACTS AND CIRCUMSTANCES OF THE CASE OF APPELLANT COMPANY ARE PARALLEL AND COVERED BY THE DECISION AND RATIO LAID DOWN BY THE HON. SUPREM E COURT IN THE CASE OF MALABAR INDUSTRIAL CO. LTD. 24 3 ITR 83 AS SUCH PROCEEDINGS CANNOT BE HELD AS ERRONEOUS THEREFORE LD CIT HAS WRONGLY ASSUMED AND INVOKED PROVISIONS OF SEC. 263 OF THE INCOME TAX ACT1961 W HICH IS CONTRARY TO THE FACTS AND PROVISIONS OF LAW AS S UCH ORDER U/S 263 IS LIABLE TO BE QUASHED. 6 .1 THAT THE ORDER OF ACIT, CIRCLE BHIWANI U/S 143(3)/147 DATED 13.12.2011 WAS NEITHER ERRONEOUS NOR IT WAS I PREJUDICIAL TO INTEREST OF REVENUE CON SIDERING PAGE | 10 THE FACTS AND CIRCUMSTANCES OF THE CASE AND PROVISI ONS OF LAW. I AS SUCH ACTION OF LD CIT-HISAR TO SET ASI DE THE SAME U/S 263 IS WITHOUT JURISDICTION AND NEEDS TO B E UNDONE. 7. THE LD. COMMISSIONER OF INCOME TAX - HISAR ERRED IN HOLDING THAT THE ASSESSMENT ORDER PASSED U /S. 143(3)/147 IS ERRONEOUS AND PREJUDICIAL TO THE INTE REST OF THE REVENUE, IGNORING THE FACT THAT THE LD. AO H AS ERRED IN ARBITRARILY REOPENING THE ASSESSMENT U/S 1 47 WITHOUT HAVING ANY REASONS TO BELIEVE THAT INCOME O F ASSESSEE HAS ESCAPED ASSESSMENT AS SUCH ORDER U/S 263 IS LIABLE TO BE QUASHED. 8. THE LD. COMMISSIONER OF INCOME TAX - HISAR ERRED IN HOLDING THAT THE ASSESSMENT ORDER PASSED U /S. 143(3)/147 IS ERRONEOUS AND PREJUDICIAL TO THE INTE REST OF THE REVENUE, WHICH IS BASED ON AUDIT OBJECTION AGAINST WHICH PROCEEDINGS U/S 154 INITIATED BY LD A O HAS BEEN PENDING AND WITHOUT APPLICATION OF HIS INDEPENDENT MIND AS SUCH ORDER U/S 263 ON THE BASIS OF AUDIT OBJECTION IS VOID-AB-INITIO AND NEEDS TO BE QUASHED. 9. THAT LD COMMISSIONER OF INCOME TAX HISAR EXCEEDED HIS JURISDICTION BY RELYING ON DOCUMENTS COLLECTED AS A RESULT OF SUBSEQUENT INQUIRY AFTER INITIATING THE PROCEEDINGS U/S 263 WHICH IS NOT PAR T OF RECORD OF ASSESSMENT OR REASSESSMENT PROCEEDINGS OR AVAILABLE TO LD CIT, AS SUCH SETTING ASIDE THE RE- ASSESSMENT ORDER U/S 143(3)/147 BY EXERCISING POWER S U/S 263 RELYING ON SUCH DOCUMENTS NEEDS TO BE QUASHED BEING VOID- AB-INITIO. 10. THAT IN THE FACTS AND CIRCUMSTANCE OF THE CASE THE PAGE | 11 LD. CIT HISAR IS NOT JUSTIFIED IN LAW IN SETTING AS IDE THE WELL REASONED ORDER OF THE ACIT BHIWANI DATED. 13/12/11 PASSED U/S 143(3) /147 DROPPING THE PROCEEDINGS BY FOLLOWING THE RATIO LAID DOWN BY THE HON'BLE SUPREME COURT IN THE CASE OF LOVELY EXPORTS PVT. LTD. 216 CTR 195 IN THE PROCEEDING INITIATED ON THE BASIS OF AUDIT OBJECTION WITHOUT THE EXAMINING THE RECORD AND WITHOUT RECORDING THAT THE HOW THE ORDER WAS NO T ONLY ERRONEOUS BUT ALSO PREJUDICIAL TO THE INTEREST OF THE REVENUE IGNORING THE RATIO OF MALABAR INDUSTRIAL COMPANY LTD. 243 ITR 83 11. THAT THE ORDER OF THE LD. CIT IS ALSO BAD IN LAW A S IT IS BASED ON CONSIDERING THE FRESH MATERIAL WHICH WAS NOT PART OF THE RECORD OF THE ACIT AT THE TIME OF P ASSING THE ORDER BY THE LD. ACIT DROPPING THE PROCEEDINGS U/S 148 IGNORING THE PENDING PROCEEDINGS US/S 154 ON TH E BASED ON THE AUDIT OBJECTION TO MEET WITH THE AUDIT OBJECTION AND ISSUING SPECIFIC DIRECTION TO PASS TH E ORDER IN A PARTICULAR MANNER WHICH CANNOT BE DONE IN PROCEEDINGS U/S 263 OF THE INCOME TAX ACT1961 12. THAT THE APPELLANT CRAVES RIGHT TO AMEND, ADD, DELETE OR WITHDRAW ANY OF THE GROUNDS OF APPEAL EIT HER BEFORE OR AT THE TIME OF HEARING OF THIS APPEAL. 8. THE LD. COUNSEL FOR THE ASSESSEE STRONGLY CHALLENGE D THE ORDER OF THE CIT. REFERRING PARA 12.1 OF THE ORDER OF THE CIT HE SUBMITTED THAT THE LD. CIT IS NOT IN DOUBT THAT THE ASSESSING OFFICER HAS NOT CONDUCTED ANY ENQUIRY. ACCORDING T O HIM THE ASSESSING OFFICER SHOULD HAVE MADE SOME FURTHER ENQ UIRIES. REFERRING TO THE COPY OF THE NOTICE ISSUED US/. 263 (1) DATED PAGE | 12 29.11.2012, COPY OF WHICH IS PLACED AT PAGE NO.117- 118 OF THE PAPER BOOK, HE SUBMITTED THAT IT IS THE ALLEGATION OF THE LD. CIT THAT THE ASSESSEE COMPANY HAS BENEFICIALLY ACCEPTED THE SHARE APPLICATION MONEY FROM THE COMPANIES CONTROLLED BY SH. TARUN GOYAL WHO HAS ADMITTED TO HAVE USED THESE ENTITIES FOR PROVIDING ACCOMMODATION ENTRIES. ACCORDING TO THE LD. CIT THE RE ARE CIRCUMSTANCES WHICH NECESSITATED FURTHER ENQUIRIES REGARDING THE GENUINENESS OF THESE INVESTOR COMPANIES. ACCORDING TO HIM, THE ASSESSING OFFICER SHOULD HAVE MADE FURTHER ENQUIRIE S IN THIS REGARD WHICH HE FAILED TO CARRY OUT. 8.1 REFERRING TO PAGE 17 TO PAGE 26 OF THE PAPER BO OK, HE DREW THE ATTENTION OF THE BENCH TO THE COPY OF THE ORDER PASSED U/S. 143 (3) ON 31.12.2008. HE SUBMITTED THAT THE RETURN WAS FILED U/S. 139 ON 11.10.2006 AND THE NOTICE U/S. 143 (2) WAS ISSUED ON 10.09.2007. A SEARCH IN THE CASE OF TARUN GOYAL TOOK PLACE ON 15.09.2008. IN THE ORIGINAL ASSESSMENT ORDER, THE A SSESSING OFFICER AFTER THOROUGH DISCUSSION HAS ACCEPTED THE SHARE PREMIUM OF RS.12,43,35,000/- AND THE SHARE HOLDERS CAPITAL RS.1,41,15,000/-. HE SUBMITTED THAT THERE IS NO DI SPUTE ABOUT THE SHARE CAPITAL AMOUNT OF RS.6,71,500/- AND SHARE PREMIUM OF RS.6,74,50,000/- AND THE DISPUTE IS ONLY REGARDING SHARE APPLICATION MONEY OF RS.7,10,00,000/-. REFERRING TO VARIOUS PAGES OF THE PAPER BOOK HE SUBMITTED THAT ON THREE OCCASI ONS THE DEPARTMENT HAD ACCEPTED THE VALUATION OF SHARES AFT ER MAKING THOROUGH ENQUIRY. EVEN THE AO WHO PASSED THE ORDER U/S. 147 / 143 (3) ON 13.12.2011 DID NOT FIND ANY MISTAKE IN T HE VALUATION FOR WHICH HE DID NOT MAKE ANY ADDITION AND ACCEPTED THE PAGE | 13 RETURNED INCOME BY DROPPING THE PROCEEDINGS. REFER RING TO THE OFFICE NOTE OF THE ASSESSING OFFICER HE SUBMITTED T HAT THE ASSESSING OFFICER HAS FORWARDED THE NAMES OF THE VA RIOUS INVESTOR COMPANIES WHO HAVE APPLIED IN THE SHARES OF THE ASS ESSEE COMPANY TO THE RESPECTIVE ASSESSING OFFICERS FOR TA KING NECESSARY ACTION. 8.2 THE LD. COUNSEL FOR THE ASSESSEE REFERRING TO T HE DECISION OF HONBLE DELHI HIGH COURT IN THE CASE OF CIT VS. SUN BEAM AUTO LIMITED REPORTED IN 189 TAXMAN 436 SUBMITTED THAT T HE HONBLE HIGH COURT IN THE SAID DECISION HAS HELD THAT IF WH ILE MAKING ASSESSMENT, THE AO HAS MADE INADEQUATE ENQUIRY, THA T COULD NOT, BY ITSELF GIVE OCCASION TO THE COMMISSIONER TO PASS AN ORDER U/S. 263, MERELY BECAUSE HE HAS A DIFFERENT OPINION IN T HE MATTER. IT IS ONLY IN CASES OF LACK OF ENQUIRY THAT SUCH A C OURSE OF ACTION WOULD BE OPEN. IT HAS BEEN HELD THAT WHEN FACTS CL EARLY SHOWED THAT AO HAD UNDERTAKEN EXERCISE OF EXAMINING AS TO WHETHER EXPENDITURE INCURRED BY ASSESSEE IN REPLACEMENT OF DIES AND TOOLS WAS TO BE TREATED AS REVENUE EXPENDITURE OR NOT AND ON BEING SATISFIED WITH ASSESSEES EXPLANATION, HE ACCEPTED THE SAME, IT COULD NOT BE SAID TO BE A CASE OF LACK OF ENQUIRY. ACCORDINGLY THE ORDER OF THE TRIBUNAL SETTING ASIDE THE ORDER OF TH E CIT PASSED U/S. 263 WAS UPHELD. 9. THE LD. COUNSEL FOR THE ASSESSEE REFERRING TO PA RA 8.2.2. OF THE ORDER OF LD. CIT SUBMITTED THAT THE AO HAS FOLL OWED THE DECISION OF HONBLE SUPREME COURT IN THE CASE OF LO VELY EXPORTS (P) LIMITED (SUPRA). WHERE AS IT IS THE ALLEGATION OF THE LD. CIT THAT THE ASSESSING OFFICER SHOULD HAVE FOLLOWED THE DECISION OF PAGE | 14 HONBLE DELHI HIGH COURT IN THE CASE OF CIT VS. NOV A PROMOTERS AND FINLEASE PRIVATE LIMITED REPORTED IN 342 ITR 01 69. HE SUBMITTED THAT THE ASSESSMENT ORDER IN THE INSTANT CASE U/S. 143(3) / 147 WAS PASSED ON 13.02.2011 WHERE AS THE DECISION OF HONBLE HIGH COURT IN THE CASE OF NOVA PROMOTERS (S UPRA) WAS PRONOUNCED ON 15.02.2012. THEREFORE, THE ASSESSING OFFICER COULD NOT HAVE VISUALIZED THE DECISION OF HONBLE DELHI H IGH COURT IN THE CASE OF NOVA PROMOTERS (SUPRA). 9. REFERRING TO THE DECISION OF HONBLE SUPREME COU RT IN THE CASE OF CIT VS. GM MITTAL STAINLESS STEEL PRIVATE L IMITED REPORTED IN 130 TAXMAN 67 HE SUBMITTED THAT THE HONBLE SUPR EME COURT IN THE SAID DECISION HAS HELD THAT IF AT A PARTICUL AR TIME WHEN POWER U/S. 263 WAS EXERCISED, DECISION OF JURISDICT IONAL HIGH COURT HAD NOT BEEN SET ASIDE BY THE HONBLE SUPREME COURT OR ATLEAST HAD NOT BEEN APPEALED FROM, IT WOULD NOT BE OPEN TO CIT TO HAVE PROCEEDED ON BASIS THAT HIGH COURT WAS ERRO NEOUS AND THE ASSESSING OFFICER WHO HAD ACTED IN TERMS OF HIG H COURT DECISION HAD ACTED ERRONEOUSLY. HE SUBMITTED THAT I N THIS PARTICULAR CASE, THE CIT HAS NOT RECORDED ANY REASO N WHATSOEVER FOR COMING TO THE CONCLUSION THAT THE AO WAS ERRONE OUS IN DECIDING THAT THE POWER SUBSIDY WAS CAPITAL RECEIPT . GIVEN THE FACT THAT THE DECISION OF THE JURISDICTIONAL HIGH C OURT WAS OPERATIVE AT THE MATERIAL TIME, THE AO COULD NOT BE SAID TO HAVE ERRED IN LAW. THE FACT THAT THIS COURT HAD SUBSEQU ENTLY REVERSED THE DECISION OF THE HIGH COURT WOULD NOT JUSTIFY TH E CIT IN TREATING THE ASSESSING OFFICERS DECISION AS ERRONE OUS. THE POWER OF THE CIT UNDER SECTION 263 OF THE ACT MUST BE EXE RCISED ON THE PAGE | 15 BASIS OF THE MATERIAL THAT WAS AVAILABLE TO HIM WHE N HE EXERCISED THE POWER. AT THAT TIME, THERE WAS NO DISPUTE THAT THE ISSUE WHETHER THE POWER SUBSIDY SHOULD BE TREATED AS CAPI TAL RECEIPT HAD BEEN CONCLUDED AGAINST THE REVENUE. THE SATISF ACTION OF THE CIT, THEREFORE, WAS BASED ON NO MATERIAL EITHER LEG AL OR FACTUAL WHICH WOULD HAVE GIVEN HIM THE JURISDICTION TO TAKE ACTION UNDER SECTION 263 OF THE ACT. 10. REFERRING TO VARIOUS OTHER DECISIONS HE SUBMITT ED THAT AS PER PROVISIONS OF SECTION 263 THE CIT CAN CALL FOR AND EXAMINE THE RECORD OF ANY PROCEEDING UNDER THE ACT ONLY ON THE BASIS OF HIS BEING SATISFIED THAT THE ASSESSING OFFICER WAS ERRO NEOUS IN PASSING THE ORDERS AND (2) THAT THE DECISION OF THE ASSESSING OFFICER WAS PREJUDICIAL TO THE INTEREST OF THE REVE NUE. FURTHER, THE SATISFACTION MUST BE ONE WHICH IS OBJECTIVELY JUSTI FIABLE AND CANNOT BE THE MERE IPSE DIXIT OF THE COMMISSIONER. 11. REFERRING TO THE DECISION OF HONBLE DELHI HIGH COURT IN THE CASE OF DELHI AIRPORT METRO EXPRESS (P.) LTD. 184 T TJ 32 (DEL) (CONFIRMED BY DELHI HIGH COURT AT 99 TAXMANN.COM 82 (DEL) HE SUBMITTED THAT WHERE COMMISSIONER COULD NOT SUCCESS FULLY ESTABLISH THROUGH HIS ENQUIRY THAT ORDER PASSED BY AO WAS UNSUSTAINABLE IN LAW AND MOREOVER VIEW TAKEN BY ASS ESSING OFFICER WAS A PLAUSIBLE VIEW, WHICH WAS SUPPORTED B Y VARIOUS JUDICIAL PRECEDENTS, ASSESSMENT ORDER PASSED COULD NOT BE CALLED TO BE ERRONEOUS THOUGH MAY BE PREJUDICIAL TO INTERE ST OF REVENUE 12. REFERRING TO THE DECISION IN THE CASE OF DHARAM PAL [2017] 82 TAXMAN.COM 83 (AMRITSAR TRIB) HE SUBMITTED THA T THE TRIBUNAL IN THE SAID DECISION HAS HELD THAT WHERE T HE ASSESSING PAGE | 16 OFFICER HAS EXAMINED A PARTICULAR ISSUE AND HAS COM PLETED THE ASSESSMENT AFTER TAKING A POSSIBLE VIEW, THE COMMIS SIONER IS NOT PERMITTED TO ASSUME POWERS U/S. 263 SIMPLY BECAUSE HE DOES NOT AGREE WITH THE VIEW TAKEN BY THE ASSESSING OFFICER. 13. REFERRING TO THE DECISION OF HONBLE DELHI HIGH COURT IN THE CASE OF DIRECTOR OF INCOME TAX VS. JYOTI FOUNDATION (2013) 38 TAXMANN.COM 180 HE SUBMITTED THAT THE HONBLE HIGH COURT IN THE SAID DECISION HAS HELD THAT WHERE REVISIONARY A UTHORITY OPINED THAT FURTHER ENQUIRY WAS REQUIRED, SUCH ENQU IRY SHOULD HAVE BEEN CONDUCTED BY REVISIONARY AUTHORITY HIMSEL F TO RECORD FINDING THAT ASSESSMENT ORDER PASSED BY THE AO WAS ERRONEOUS AND PREJUDICIAL TO THE INTEREST OF THE REVENUE. 14. REFERRING TO THE DECISION OF HONBLE DELHI HIGH COURT IN THE CASE OF CIT VS. ANIL KUMAR SHARMA REPORTED 194 TAXM AN 504 HE SUBMITTED THAT THE HONBLE HIGH COURT IN THE SAID D ECISION HAS HELD WHERE IT WAS DISCERNIBLE FROM RECORD THAT ASSE SSING OFFICER HAD APPLIED HIS MIND TO ISSUE IN QUESTION, COMMISSI ONER COULD NOT INVOKE SECTION 263 MERELY BECAUSE HE HAS DIFFER ENT OPINION. 15. REFERRING TO THE DECISION OF HONBLE DELHI HIGH COURT IN THE CASE OF CIT VS. HINDUSTAN MARKETING AND ADVERTISING COMPANY LIMITED REPORTED IN 341 ITR 180 HE SUBMITTED THAT T HE HONBLE DELHI HIGH COURT IN THE SAID DECISION HAS HELD THAT WHERE THE ITO HAD MADE REASONABLE DETAILED ENQUIRIES, HAD COLLECT ED RELEVANT MATERIAL AND DISCUSSED VARIOUS FACTS OF CASE WITH A SSESSEE, ORDER OF CIT TO DIRECT FRESH ASSESSMENT BY GOING DEEPER I NTO THE MATTER WOULD NOT FORM A VALID OR LEGAL BASIS TO EXERCISE J URISDICTION U/S. 263. PAGE | 17 16. REFERRING TO VARIOUS OTHER DECISIONS HE SUBMITT ED THAT WHEN THE VIEW TAKEN BY THE AO WAS ONE OF THE PLAUSIBLE V IEW THEN THE LD.CIT CANNOT INVOKE JURISDICTION U/S. 263. HE SUBM ITTED THAT FOR INVOKING THE JUSTIFICATION UNDER SECTION 263 OF THE IT ACT 1961 THE TWIN CONDITIONS NAMELY THE ORDER IS ERRONEOUS AND T HE ORDER IS PREJUDICIAL TO THE INTEREST OF THE REVENUE MUST BE SATISFIED. IN THE INSTANT CASE ALTHOUGH THE ORDER MAY BE PREJUDICIAL TO THE INTEREST OF THE REVENUE AS PER THE LD. CIT, HOWEVER, IT CANN OT BE SAID THAT THE ORDER IS ERRONEOUS SINCE THE AO HAS TAKEN A PLA USIBLE VIEW IN THE LIGHT OF THE DECISION OF HONBLE SUPREME COURT IN THE CASE OF LOVELY EXPORTS (P) LTD. (SUPRA) PREVAILING AT THAT TIME. THEREFORE, THE LD. CIT COULD NOT HAVE INVOKED JURISDICTION U/S 263 OF THE IT ACT. HE ACCORDINGLY SUBMITTED THAT THE ORDER OF THE CIT BE SET ASIDE AND THE GROUNDS RAISED BY THE ASSESSEE BE ALL OWED. 17. THE LD. DR ON THE OTHER HAND HEAVILY RELIED ON THE ORDER OF THE LD. CIT. HE SUBMITTED THAT THE VERY BASIS ON WH ICH THE REOPENING WAS MADE WAS NOT ADDRESSED BY THE AO. NO DEEPER ENQUIRY WAS CONDUCTED BY THE ASSESSING OFFICER TO T AX THE BOGUS SHARE CAPITAL AND SHARE PREMIUM IN THE HANDS OF THE ASSESSEE. HE SUBMITTED THAT THE ORDER PASSED BY THE AO OF DELHI IN THE CASE OF THE INVESTOR COMPANIES WAS VERY MUCH AVAILABLE WITH THE AO AT THE TIME OF PASSING OF THE ASSESSMENT ORDER BUT HE CHOSE NOT TO CONSIDER THE SAME. 18. REFERRING TO THE DECISION OF HONBLE SUPREME CO URT IN THE CASE OF DENIEL MERCHANTS PRIVATE LIMITED AND ANOTHE R VS. ITO PAGE | 18 VIDE ORDER DATED 29.11.2017 HE SUBMITTED THAT HONB LE SUPREME COURT IN THE SAID DECISION HAS HELD THAT IF NO PROP ER ENQUIRY WAS CONDUCTED BY THE ASSESSING OFFICER WHILE MAKING THE ASSESSMENT AND HE ACCEPTS THE EXPLANATION OF THE ASSESSEE IN S O FAR AS RECEIPT OF SHARE APPLICATION MONEY IS CONCERNED, THE ORDER OF THE CIT SETTING ASIDE THE ORDER OF THE ASSESSING OFFICER WI TH A DIRECTION TO CARRY OUT A THOROUGH AND DETAILED ENQUIRY IS JUSTIF IED. THE ORDER OF THE HONBLE HIGH COURT WAS ACCORDINGLY UPHELD. H E ACCORDINGLY SUBMITTED THAT SINCE THE AO IN THE INSTANT CASE HAS NOT MADE ANY PROPER ENQUIRY WHILE MAKING THE ASSESSMENT AND ACCE PTED THE EXPLANATION OF THE ASSESSEE ON ACCOUNT OF RECEIPT O F SHARE APPLICATION MONEY, THEREFORE, THE LD. CIT IS JUSTIF IED IN INVOKING THE JURISDICTION U/S. 263 OF THE IT ACT. HE ALSO R ELIED ON THE FOLLOWING DECISIONS :- 1. MALABAR INDUSTRIAL CO. LTD. VS. COMMISSIONER OF INC OME TAX 243 ITR 83 (SC) 2. BHARAT OVERSEAS BANK LTD. VS. COMMISSIONER OF INCOM E TAX 152 TTJ 546 (CHENNAI) 3. PRATAP FOOTWEAR VS. ACIT 1 SOT 638 (JABALPUR) 4. GEE VEE ENTERPRISES VS. ADDITIONAL COMMISSIONER OF INCOME TAX 99 ITR 375 5. CIT VS. NAGESH KNITWEAR ITA NO.591/2008 ORDER DATED 01.06.2012. 19. THE LD. COUNSEL FOR THE ASSESSEE IN HIS REJOIND ER SUBMITTED THAT IN THE CASE OF DENIEL MERCHANTS PRIVATE LIMITE D (SUPRA) NO PAGE | 19 ENQUIRY WAS CONDUCTED BY THE AO WHEREAS IN THE INST ANT CASE ENEQUIRIES WERE CONDUCTED TWICE I.E. ONCE DURING TH E ORIGINAL ASSESSMENT PROCEEDINGS PASSED U/S. 143 (3) AND SUBS EQUENTLY DURING THE REASSESSMENT PROCEEDINGS WHERE ORDER WAS PASSED U/S. 143 (3)/ 147. THEREFORE, IT CANNOT BE SAID TH AT IN THE INSTANT CASE NO PROPER ENQUIRY WAS CONDUCTED. HE ACCORDING LY SUBMITTED THAT THE ORDER OF HONBLE SUPREME COURT IN THE CAS E OF DANIEL MERCHANTS (P) LTD. (SUPRA) IS NOT APPLICABLE TO THE FACTS OF THE PRESENT CASE. 20. WE HAVE CONSIDERED THE RIVAL ARGUMENTS MADE BY BOTH THE SIDES, PERUSED THE ORDERS OF THE AUTHORITIES BELOW AND THE PAPER BOOK FILED ON BEHALF OF THE ASSESSEE. WE HAVE ALSO CONSIDERED THE VARIOUS DECISIONS CITED BEFORE US BY BOTH THE SIDES . WE FIND THE ORIGINAL ASSESSMENT IN THE INSTANT CASE WAS COMPLET ED BY THE ASSESSING OFFICER U/S. 143 (3) ON 31.12.2008 ACCEPT ING THE RETURNED INCOME AT NIL. WE FIND THE CASE OF THE ASS ESSEE WAS REOPENED BY ISSUE OF NOTICE U/S. 148 AFTER RECORDIN G REASONS AND SUBSEQUENTLY THE ASSESSING OFFICER COMPLETED THE AS SESSMENT U/S. 143 (3)/147 ON 13/12/2011 ACCEPTING THE RETURN ED INCOME AND THEREBY DROPPING THE PROCEEDINGS INITIATED U/S. 147 OF THE IT ACT. WE FIND THE LD. CIT HELD THE ORDER PASSED BY ASSESSING OFFICER U/S 143 (3)/147 AS ERRONEOUS AND PREJUDICIA L TO THE INTEREST OF THE REVENUE ON THE GROUND THAT THE ASSE SSING OFFICER SIMPLY ACCEPTED THE CASE DECISION RELIED ON BY THE ASSESSEE IN THE CASE OF LOVELY EXPORTS (P) LIMITED (SUPRA) AND THE AO HAD NOT MADE ANY FURTHER ENQUIRY REGARDING SUCH SHARE APPLI CANTS. PAGE | 20 ACCORDING TO THE LD. CIT AFTER THE DECISION OF HON BLE SUPREME COURT VARIOUS OTHER COURTS HAD OCCASION TO CONSIDER THE SAID DECISION AND ONE SUCH DECISION WAS DECISION OF HON BLE DELHI HIGH COURT IN THE CASE OF CIT VS. NOVA PROMOTERS FI NLEASE PRIVATE LIMITED REPORTED IN 342 ITR 169. HE WAS ALSO OF TH E OPINION THAT THE AO SHOULD HAVE APPRECIATED THE EVIDENCE GATHERE D BY THE INVESTIGATION WING WHERE IN CERTAIN INCRIMINATING M ATERIAL WERE GATHERED AND THE ASSESSING OFFICER SHOULD HAVE COND UCTED FURTHER ENQUIRY WHICH WERE NECESSARY TO GATHER RELEVANT MAT ERIAL WHICH THE AO FAILED TO DO. ACCORDING TO THE LD. CIT THER E WAS COMPLETE NON APPLICATION OF MIND ON THE PART OF THE AO IN NO T APPRECIATING THE MATERIAL AVAILABLE ON RECORD AS WELL AS IN NOT FOLLOWING COURSE OF FURTHER ENQUIRY TO GATHER RELEVANT MATERIAL. SIN CE THERE WAS FAILURE ON THE PART OF THE AO TO APPLY THE PROVISIO N OF LAW CORRECTLY, THEREFORE, HE HELD THAT THE ORDER PASSED BY THE AO IS BOTH ERRONEOUS AS WELL AS PRE-JUDICIAL TO THE INTER EST OF THE REVENUE. 20.1 IT IS THE SUBMISSION OF THE LD. COUNSEL FOR THE ASSESSEE THAT THE AO HAD FOLLOWED THE CORRECT PROPOSITION OF LAW AVAILABLE AT THE TIME OF PASSING OF THE ORDER. AS PER DECISION OF H ONBLE SUPREME COURT IN THE CASE OF LOVELY EXPORTS (P) LTD. (SUPRA ) EVEN IF THE SHARE HOLDERS ARE BOGUS, ADDITION CANNOT BE MADE IN THE HANDS OF THE ASSESEE AND ADDITION CAN BE MADE ONLY IN THE HA NDS OF SUCH BOGUS SHARE HOLDERS IF THEIR IDENTITY IS KNOWN TO T HE DEPARTMENT. IT IS THE SUBMISSION OF THE LD. COUNSEL FOR THE ASS ESSEE THAT FOR INVOKING JURISDICTION U/S. 263 THE ORDER MUST BE BO TH ERRONEOUS AS WELL AS PREJUDICIAL TO THE INTEREST OF THE REVEN UE. THE TWIN PAGE | 21 CONDITIONS MUST BE SATISFIED AND ABSENCE OF ANY ONE CANNOT EMPOWER THE CIT TO INVOKE JURISDICTION U/S. 263. IT IS ALSO HIS SUBMISSION THAT THE ASSESSING OFFICER IN THE INSTAN T CASE HAD CONDUCTED THOROUGH ENQUIRY TWICE AND IT IS NOT THE CASE OF NO ENQUIRY OR LACK OF ENQUIRY. 21. WE FIND SOME FORCE IN THE ABOVE ARGUMENTS OF TH E LD. COUNSEL FOR THE ASSESSEE. WE FIND THE AO IN THE OR DER PASSED U/S. 143(3) /147 HAS FOLLOWED THE DECISION OF HONB LE SUPREME COURT IN THE CASE OF LOVELY EXPORTS (P) LIMITED (SU PRA) IN LETTER AND SPIRIT. IN THE OFFICE NOTE, COPY OF WHICH IS A VAILABLE IN THE PAPER BOOK, IT IS SEEN THAT THE ASSESSING OFFICER H AD FORWARDED INFORMATION TO THE CONCERNED AO OF THE INVESTOR COM PANIES FOR TAKING FURTHER NECESSARY ACTION AGAINST THEM. THE RELEVANT PORTION OF THE OFFICE NOTE READS AS UNDER :- OFFICE NOTE FROM THE RECORD, IT IS SEEN THAT THE FOLLOWING COMP ANY AHS DEPOSITED BELOW MENTIONED AMOUNT OF SHARE APPLICATION MONEY WITH TH E ASSESSEE M/S. DWARKADISH BUILD WELL PVT. LTD. C/O N. K. JAIN, ADVOCATE, NAYA BAZAR, BHIWANI. THE ASSESSEE HAS FURNISHED INFORMATION ALONGWITH SUPPORTING DOCU MENTARY EVIDENCE WITH REGARD TO AMOUNT OF SHARE APPLICATION MONEY AND AFTER VERI FICATION OF THESE AMOUNTS FROM THE RELEVANT BOOKS OF A/C AS WELL AS FROM THE BANK STATEMENTS, NO ADDITION IS REQUIRED TO BE CONSIDERED IN THE SAID ASSESSEE COMPANY CASE. THE INFORMATION OF THE FOLLOWING COMPANY ARE BEING REFERRED/ SENT TO THE C ONCERNED ASSESSING OFFICER FOR TAKING FURTHER NECESSARY ACTION AGAINST THE BELOW C OMPANIES. PAGE | 22 SR. NO. NAME OF THE ENTRY PROVIDER ENTRY AMOUNT OF SHARE APPLICATION MONEY ( IN RS.) 1 ADONIS FINANCIAL SERVICES PVT. LTD. 13/34, WEA, ARYA SAMAJ ROAD, KAROL BAGH, 2500000 2 ARIES CRAFTS PVT. LTD. 13/34, WEA, ARYA SAMAJ ROAD, KAROL BAGH 5000000 3 BHAWANI PORTFOLIO PVT. LTD. 13/34, WEA, ARYA SAMAJ ROAD, KAROL BAGH 3000000 4 CAMPARI FISCAL SERVICES PVT. LTD. 13/34, WEA, 4 TH FLOOR, MAIN ARYA SAMAJ ROAD, KAROL BAGH 6000000 5 CORPORATE FINLEASE PVT LTD. 13/34, WEA, ARYA SAMAJ ROAD, KAROL BAGH 5500000 6 DEEP SEA DRILING PVT. LTD. 13/34, WEA, ARYA SAMAJ ROAD, KAROL BAGH 5500000 7 DU SECURITIES PVT. LTD. 13/34, WEA, ARYA SAMAJ ROAD, KAROL BAGH 3000000 8 EBONY INVESTMENT PVT. LTD. 13/34, WEA, ARYA SAMAJ ROAD, 2500000 PAGE | 23 KAROL BAGH 9 KAROL BAGH, TRADING LTD. 203 DHAKA CHAMBERS 2069/39, NAIWALA, KAROL BAGH, NEW DELHI 5000000 10 MERTA FINANCE LTD. 13/34, WEA, ARYA SAMAJ ROAD, KAROL BAGH 5000000 11 SADGURU FINMIN PVT. LTD. 13/34, WEA, ARYA SAMAJ ROAD, KAROL BAGH 5000000 12 SAI DWARKA FINMAN PVT. LTD. 13/34, WEA, ARYA SAMAJ ROAD, KAROL BAGH 5000000 13 TAURUS IRON & STEEL CO. PVT. LTD. GOHANA DISTT. SONEPAT 3000000 14 TEJASVI INVESTMENT PVT. LTD. GOHANA DISTT. SONEPAT 5000000 15 THAR STEEL PVT. LTD. 13/34, WEA, ARYA SAMAJ ROAD, KAROL BAGH 4500000 16 VOLGA CRESEC PVT. LTD. 13/34, WEA, ARYA SAMAJ ROAD, KAROL BAGH 5500000 TOTAL 71000000 22. THUS WHEN THE AO PASSED THE ORDER U/S. 147 / 14 3 (3), WE FIND HE HAS FOLLOWED THE DECISION OF HONBLE SUPREM E COURT IN THE CASE OF LOVELY EXPORTS (P) LIMITED (SUPRA) IN LETTER AND PAGE | 24 SPIRIT. SO FAR AS THE ALLEGATIONS OF THE LD. CIT T HAT SUBSEQUENT DECISION HAD COME FOR WHICH HE REFERRED TO THE DECI SION OF HONBLE DELHI HIGH COURT IN THE CASE OF NOVA PROMOT ERS FINLEASE (SUPRA) IS CONCERNED WE FIND THE HONBLE DELHI HIGH COURT PRONOUNCED THE SAID DECISION ON 15.02.2012 WHEREAS THE AO IN THE INSTANT CASE HAS PASSED THE ORDER U/S. 143(3)/1 47 ON 13.12.2011. THEREFORE, WE DO NOT FIND ANY MERIT IN THE ALLEGATION OF THE LD. CIT OF NON CONSIDERATION OF T HE ABOVE DECISION SINCE THE SAME WAS NOT AVAILABLE AT THE TI ME OF PASSING OF THE ASSESSMENT ORDER. 23. THE HONBLE SUPREME COURT IN THE CASE OF G. M. MITTAL STAINLESS STEEL PRIVATE LIMITED (SUPRA) AT PARA 5 O F THE ORDER HAS OBSERVED AS UNDER :- 1. IN THIS PARTICULAR CASE, THE CIT HAS NOT RECORDED ANY REASON WHATSOEVER FOR COMING TO THE CONCLUSION THAT THE AS SESSING OFFICER WAS ERRONEOUS IN DECIDING THAT THE POWER SUBSIDY WA S CAPITAL RECEIPT. GIVEN THE FACT THAT THE DECISION OF THE J URISDICTIONAL HIGH COURT WAS OPERATIVE AT THE MATERIAL TIME, THE ASSES SING OFFICER COULD NOT BE SAID TO HAVE ERRED IN LAW. THE FACT THAT TH IS COURT HAD SUBSEQUENTLY REVERSED THE DECISION OF THE HIGH COUR T WOULD NOT JUSTIFY THE CIT IN TREATING THE ASSESSING OFFICERS DECISION AS ERRONEOUS. THE POWER OF THE CIT UNDER SECTION 263 OF THE ACT MUST BE EXERCISED ON THE BASIS OF THE MATERIAL THAT WAS AVAILABLE TO HIM WHEN HE EXERCISED THE POWER. AT THAT TIME, THERE W AS NO DISPUTE THAT THE ISSUE WHETHER THE POWER SUBSIDY SHOULD BE TREATED AS CAPITAL RECEIPT HAD BEEN CONCLUDED AS AGAINST THE R EVENUE. THE SATISFACTION OF THE CIT, THEREFORE, WAS BASED ON NO MATERIAL EITHER PAGE | 25 LEGAL OR FACTUAL WHICH WOULD HAVE GIVEN HIM THE JUR ISDICTION TO TAKE ACTION UNDER SECTION 263 OF THE ACT. 24. SO FAR AS THE ALLEGATION OF THE LD. CIT THAT TH E AO SHOULD HAVE CONDUCTED FURTHER ENQUIRY WHICH WERE NECESSARY TO GATHER RELEVANT MATERIAL WHICH THE AO FAILED TO DO AND THE RE WAS NON APPLICATION OF MIND ON THE PART OF THE AO IS CONCER NED, WE FIND IN THE INSTANT CASE THOROUGH ENQUIRIES WERE CONDUCT ED BY THE AO BOTH AT THE TIME OF ORIGINAL ASSESSMENT AND AT T HE TIME OF REASSESSMENT PROCEEDINGS. FULL DETAILS GIVING THE N AMES, ADDRESSES, NUMBER OF SHARES OF NOMINAL VALUE AND SH ARE PREMIUM AMOUNT OF ALL THE SHARE HOLDERS ALONGWITH T HEIR BANK STATEMENTS, COPY OF IT RETURNS, PAN ETC. WERE FILED BEFORE THE AO. EVEN IF THE SHARE HOLDERS WERE BOGUS AS PER AL LEGATION OF THE REVENUE IN VIEW OF THE REASONS RECORDED FOR REO PENING, HOWEVER, AS PER PREVAILING LAW AT THAT TIME IN VIEW OF DECISION OF HONBLE SUPREME COURT IN THE CASE OF LOVELY EXPORTS (P) LIMITED (SURPA) ADDITION COULD NOT HAVE BEEN MADE IN THE HA NDS OF THE ASSESSEE AND ADDITION, IF ANY, COULD HAVE BEEN MADE ONLY IN THE HANDS OF SUCH BOGUS SHARE HOLDERS. SINCE AO HAS TA KEN A PLAUSIBLE VIEW, THEREFORE, IT CANNOT BE SAID THAT T HE ORDER OF THE AO IS ERRONEOUS. 25. WE FIND THE HONBLE DELHI HIGH COURT IN THE CAS E OF PCIT VS. DELHI AIRPORT METRO EXPRESS PRIVATE LIMITED VID E ITA NO.705/2017 ORDER DATED 05.09.2017 HAS HELD THAT FO R THE PURPOSE OF EXERCISING JURISDICTION U./S. 263 OF THE ACT, THE PAGE | 26 CONCLUSION THAT THE ORDER OF THE AO IS ERRONEOUS AN D PREJUDICIAL TO THE INTEREST OF THE REVENUE HAS TO BE PRECEDED B Y SOME MINIMAL ENQUIRY. IF THE PCIT IS OF THE VIEW THAT T HE AO DID NOT UNDERTAKE ANY ENQUIRY, IT BECOMES INCUMBENT ON THE PCIT TO CONDUCT SUCH ENQUIRY. IF THE PCIT DOES NOT CONDUCT SUCH BASIC EXERCISE THEN THE CIT IS NOT JUSTIFIED IN SETTING A SIDE THE ORDER U/S. 263 OF THE IT ACT. 26. WE FIND THE HONBLE DELHI HIGH COURT IN THE CAS E OF JYOTI FOUNDATION (SUPRA) HAS HELD THAT WHERE REVISIONARY AUTHORITY OPINED THAT FURTHER ENQUIRY WAS REQUIRED, SUCH ENQU IRY SHOULD HAVE BEEN CONDUCTED BY REVISIONARY AUTHORITY HIMSEL F TO RECORD FINDING THAT ASSESSMENT ORDER PASSED BY THE AO WAS ERRONEOUS AND PRE JUDICIAL TO THE INTEREST OF THE REVENUE. W E FIND HONBLE DELHI HIGH COURT IN THE CASE OF SUNBEAM AUTO LIMITE D (SUPRA) HAS HELD THAT IF THE AO, WHILE MAKING AN ASSESSMENT , HAS MADE INADEQUATE ENQUIRY THAT WOULD NOT BY ITSELF GIVE OC CASION TO THE CIT TO PASS ORDER U/S.263 MERELY BECAUSE HE HAS DIF FERENT OPINION OF THE MATTER. ONLY IN THE CASE OF LACK OF ENQUIRY THAT SUCH A COURSE OF ACTION WOULD BE OPEN. IT HAS FURTH ER BEEN HELD IN THE SAID DECISION THAT WHERE THE VIEW TAKEN BY A O WAS ONE OF THE POSSIBLE VIEWS, THEREFORE, THE ASSESSMENT ORDER PASSED BY THE AO CANNOT BE HELD TO BE PREJUDICIAL TO THE INTE REST OF THE REVENUE. THE HONBLE DELHI HIGH COURT IN THE CASE O F ANIL KUMAR SHARMA (SUPRA) HAS HELD THAT WHERE IT WAS DISCERNIB LE FROM RECORD THAT THE AO HAD APPLIED HIS MIND TO AN ISSUE IN QUESTION, COMMISSIONER COULD NOT INVOKE SECTION 263 MERELY BE CAUSE HE PAGE | 27 HAS DIFFERENT OPINION. 27. SO FAR AS THE DECISION RELIED ON BY LD. DR IN T HE CASE OF DENIEL MERCHANTS (P) LTD. (SUPRA) IS CONCERNED, THE LD. DR COULD NOT CONTROVERT THE SUBMISSION OF THE LD. COUNSEL FO R THE ASSESSEE THAT NO ENQUIRY WAS CONDUCTED IN THE SAID CASE WHEREAS IN THE CASE OF THE ASSESSEE ENQUIRIES WERE CONDUCTED TWICE I.E. DURING THE ORIGINAL ASSESSMENT PROCEEDIN GS AND SECONDLY DURING THE REASSESSMENT PROCEEDINGS. THERE FORE, THE DECISION RELIED ON BY LD. DR IS NOT APPLICABLE TO T HE FACTS OF THE PRESENT CASE. WE FIND FROM A PERUSAL OF THE PAPER BOOK THAT THE ASSESSEE DURING THE COURSE OF ORIGINAL ASSESSMENT P ROCEEDINGS AS WELL AS DURING REASSESSMENT PROCEEDINGS HAD FILE D THE REQUISITE DETAILS AS CALLED FOR BY THE AO AND THE A SSESSING OFFICER AFTER CONSIDERING THE SAME AND FOLLOWING TH E DECISION OF HONBLE SUPREME COURT IN THE CASE OF LOVELY EXPORT (SUPRA) WHICH WAS PREVAILING AT THE TIME OF PASSING OF THE ORDER COMPLETED THE ASSESSMENT AND HE HAS INFORMED THE AO OF THE INVESTOR COMPANIES TO PASS APPROPRIATE ORDER. THERE FORE, IN VIEW OF OUR DISCUSSION IN THE PRECEDING PARAGRAPHS THE O RDER OF THE AO IN THE INSTANT CASE CANNOT BE HELD AS ERRONEOUS. SINCE FOR INVOKING JURISDICTION U/S. 263 THE TWIN CONDITIONS I.E. ORDER MUST BE ERRONEOUS AND THE ORDER MUST BE PREJUDICIAL TO THE INTEREST OF REVENUE MUST BE FULFILLED AND SINCE, WE HAVE HELD THAT THE ORDER IS NOT ERRONEOUS, THEREFORE, THE TWI N CONDITIONS ARE NOT SATISFIED. THEREFORE, THE LD. CIT IN OUR OP INION COULD NOT HAVE INVOKED JURISDICTION U/S. 263 OF THE IT ACT. WE, THEREFORE, PAGE | 28 SET ASIDE THE ORDER OF THE CIT PASSED U/S. 263 OF T HE IT ACT AND THE GROUNDS RAISED BY THE ASSESSEE ARE ALLOWED. 28. IN THE RESULT, THE APPEAL FILED BY THE ASSESSEE IS ALLOWED. ORDER PRONOUNCED IN THE OPEN COURT ON 01.07.2019. SD/- SD/- (KULDIP SINGH) (R.K PANDA) JUDICIAL MEMBER ACCOUNTANT MEMB ER *NEHA* DATE:- 01.07.2019 COPY FORWARDED TO: 1. APPELLANT 2. RESPONDENT 3. CIT 4. CIT(APPEALS) 5. DR: ITAT ASSISTANT REGISTRAR ITAT NEW DELHI DATE OF DICTATION DATE ON WHICH THE TYPED DRAFT IS PLACED BEFORE THE DICTATING MEMBER DATE ON WHICH THE APPROVED DRAFT COMES TO THE SR.PS /PS DATE ON WHICH THE FAIR ORDER IS PLACED BEFORE THE D ICTATING MEMBER FOR PRONOUNCEMENT DATE ON WHICH THE FAIR ORDER COMES BACK TO THE SR. PS/ PS DATE ON WHICH THE FINAL ORDER IS UPLOADED ON THE WE BSITE OF ITAT 01.07.2019 DATE ON WHICH THE FILE GOES TO THE BENCH CLERK DATE ON WHICH FILE GOES TO THE HEAD CLERK. THE DATE ON WHICH FILE GOES TO THE ASSISTANT REGIST RAR FOR SIGNATURE ON THE ORDER DATE OF DISPATCH OF THE ORDER