Kamal Oswal, Ludhiana V. PR.CIT-1, Ludhiana

ITA 65/CHANDI/2021

• Counselvise Citation: [2021] 104 COUNSELVISE.COM (IT) 5902 (ITAT-CHANDIGARH)
• Duration Of Justice: 5 month(s) 16 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 21-12-2021
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: B
• Assessment Year: 2016-2017
• Appeal Filed On: 05-07-2021
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Keywords: Revision of order; Share purchase agreement; Assessment record
• Section: 143(3); 13; 20

Judgement Text

आयकर य कर , य य “ए एए ए”, IN THE INCOME TAX APPELLATE TRIBUNAL, CHANDIGARH BENCH ‘A’, CHANDIGARH , ेख !"य एवं ए .के . ' र , य य)क !"य BEFORE SMT.ANNAPURNA GUPTA, ACCOUNTANT MEMBER AND SHRI N.K. CHOUDHRY, JUDICIAL MEMBER आयकर अपील सं./ ITA No.65/Chd/2021 / Assessment Year : 2016-17 Kamal Oswal, C/o Oswal Woollen Mills Ltd., B-XXIX-105, G.T. Road, Sherpur, Ludhiana. ब म The Pr. Commissioner of Income Tax-1, Ludhiana. ./PAN NO: AACP09697F /Appellant /Respondent आ क ./ ITA No.66/Chd/2021 / Assessment Year : 2016-17 Jawaharlal Oswal, C/o Oswal Woollen Mills Ltd., B-XXIX-105, G.T. Road, Sherpur, Ludhiana. ब म The Pr. Commissioner of Income Tax-1, Ludhiana. ./PAN NO: AABP02481J /Appellant /Respondent & आ क ./ ITA No.67/Chd/2021 / Assessment Year : 2016-17 Ritu Oswal, C/o Oswal Woollen Mills Ltd., B-XXIX-105, G.T. Road, Sherpur, Ludhiana. ब म The Pr. Commissioner of Income Tax-1, Ludhiana. ./PAN NO: AABP02484P /Appellant /Respondent ITA No.65,66 & 66/Chd/2021 A.Y. 2016-17 Page 2 of 15 2 क ! /Assessee by : Shri Navdeep Sharma, Adv. " क ! / Revenue by : Sarabjeet Singh, CIT DR # $ क % /Date of Hearing : 12.11.2021 &'() क % /Date of Pronouncement: 22.12.2021 (Hearing through Webex) आदेश/ORDER Per Annapurna Gupta, Accountant Member: The above appeals have been preferred by different assessees against separate orders of the Principal Commissioner of Income Tax, Ludhiana-1 (in short the ‘Ld.Pr.CIT) all dated 31.03.2021 all relating to assessment year 2016-17 passed in exercise of revisionary jurisdiction u/s 263 of the Income Tax Act, 1961 (hereinafter referred to as ‘Act’. At the outset it was stated that the issue and facts involved in all these appeals were identical, therefore, all the appeals were heard together and are disposed off by this consolidated order for the sake of convenience. 2. The Ld.Counsel for the assessee stated that he shall be dealing with the facts in the case of Kamal Oswal in ITA No.65/Chd/2021 for making his arguments and stated that the facts in the remaining two appeals were identical. The ITA No.65,66 & 66/Chd/2021 A.Y. 2016-17 Page 3 of 15 3 Ld. DR fairly admitted to the same though pointed out that the only difference in the facts related to the date of investments made by different assesses though all admittedly made in the same year. 3. We have heard both the parties. As transpires from the order of the Ld. Pr.CIT, the jurisdiction to revise the order of the AO was assumed by the Ld. Pr.CIT on finding from a perusal of the assessment record that the AO had failed to make due inquiries relating to the investments made by the assessee in the shares of a company of United Kingdom, M/s Crownstar Ltd., during the year. The investment amounted to Rs.66,63,028/-. The contents of show cause notice issued to the assessee dated 01.03.2021 as reproduced in the order of the Ld. Pr.CIT as under: "2.3 That on the perusal of the record it is revealed that during the year under consideration i.e. AY 2016-17, you have invested Rs.66,63,028/-28/- in the shares of M/s Crownstar Ltd. of United Kingdom. It is also seen from the record that all the directors of this company are your family members. It is also seen from the record that your Account No. 21062509395 being maintained with Allahabad Bank, credited Rs 70,00,000/- from M/s Abhilash Growth Pvt. Ltd as Loan Repayment and on the same date amount of Rs. 66,63,028/- has been invested in the share of M/s Crownstar Ltd. The perusal of the assessment records reveals that the AO has not examined the business activities being carried out by M/s Crownstar Ltd. in which all the directors are appeared to be a family member. Further perusal of the records reveals that the AO has not investigated the nature of ITA No.65,66 & 66/Chd/2021 A.Y. 2016-17 Page 4 of 15 4 investment made and what type of financial return has been received from this investment. Further it is noticed that the AO had done assessment although e-Assessment Portal but on perusal of records available it is seen that the AO has not placed his opinion on this portal even after having facility available on ITBA whether he has verify that investment and income relating to foreign financial interest have been duly disclosed which was the main issue of the case.” 4. Thereafter due reply was filed by the assessee after considering which the Ld. Pr.CIT held the order passed to be erroneous so as to cause prejudice to the Revenue on account of non examination by the AO of the nature of business activities as well as financial worth to M/s Crownstar Ltd., as also the financial return from the said investment. 5. The contention of the Ld.Counsel for the assessee is that the assessment in the impugned case was a limited scrutiny assessment solely for the purpose of examining whether the investment and income relating to foreign financial interest were duly disclosed and during assessment proceedings the assessee had filed reply to the same duly substantiated with evidences stating that the investment made in M/s Crownstar Ltd. amounting to Rs.66,63,028/- was duly reflected in the Balance Sheet of the assessee and also in the income tax return filed and it had also been explained to the AO that the investment had ITA No.65,66 & 66/Chd/2021 A.Y. 2016-17 Page 5 of 15 5 been sourced from the return of loan given by the assessee to one M/s Abhilash Growth Pvt. Ltd. amounting to Rs.70 lacs. To this end our attention was drawn to the following documents placed in a paper book before us : a) copy of the notice issued u/s 143(3) of the Act stating that the issue needing examination, placed at Paper Book page Nos.25 & 26 b) replies filed by the assessee dated 02.08.2018 and 20.12..2017, placed at Paper Book page Nos.27 to 30 & 30-A to 30-O containing the aforesaid replies of the assessee as also necessary documents evidencing the disclosure of investment in M/s Crownstar Ltd. in the Balance Sheet of the assessee, in the income tax return and c) the source of investment being return of loan from M/s Abhilash Growth Pvt. Ltd. evidenced by copy of ledger account of the said company and also copy of bank statement of the assessee reflecting the receipt of the same from Abhilash Growth Pvt. Ltd. and its immediate utilization for the purpose of investment by the assessee in M/s Crownstar Ltd. ITA No.65,66 & 66/Chd/2021 A.Y. 2016-17 Page 6 of 15 6 6. Besides the Ld.Counsel for the assessee pointed out that it had also been stated to the Ld. Pr.CIT that no income had been earned from the said investment and to this end our attention was drawn to the reply of the assessee stating so placed at Paper Book page No.44. His contention, therefore, was that the issue of investment made by the assessee in a company outside India was the limited purpose for framing the assessment, which had been duly replied by the assessee and accordingly accepted by the AO also and, therefore, there was no error in the order of the AO. He has also drawn our attention to the fact that identical investments in the same company were made by the assessee in the preceding and succeeding years also which were also examined during assessment proceedings and accepted by the AO. To this end our attention was drawn to various documents relating to assessment years 2015-16, 2017-18 and 2018-19 to the effect relating to inquiries made by the AO regarding the investments made by the assessee in M/s Crownstar Ltd., UK and replies filed by the assessee disclosing the investments in his financial statements and also his return of income and also explaining the source of the same. The documents relating to assessment year 2015- ITA No.65,66 & 66/Chd/2021 A.Y. 2016-17 Page 7 of 15 7 16 were placed before us at Paper Book page Nos.1 to 20 as under: 1 ) C o p y of N o ti c e d a t e d 0 5 . 0 8 . 2 0 1 6 u / s 1 4 3 ( 2 ) of In c o me T a x A c t f o r A . Y . 2 0 1 5 - 1 6 . 2 ) C o p y o f l e t te r d t. 2 0 . 0 8 . 2 0 1 6 i n r e p l y t o N o ti c e d t. 0 5 . 0 8 . 2 0 1 6 f o r A . Y . 2 0 1 5 - 1 6 . 3 ) C o p y of l e tt e r d t. 1 4 . 0 3 . 2 0 1 7 i n A . Y . 2 0 1 5 - 1 6 . 4 ) C o p y of A s se s s m e n t O r d e r p a s se d u / s 1 4 3 ( 2 ) of th e A c t f o r A . Y. 2 0 1 5 - 1 6 . ” Relating to assessment year 2017-18 the documents were placed at paper book page No.42 to 48A & B as under: 1 ) C o p y of n o t i c e d a t e d 0 1 . 0 8 . 2 0 1 9 i s su e d u / s 1 4 2 ( 1 ) of In c o me T ax A c t f o r A . Y . 2 0 1 7 - 1 8 . 2 ) C o p y of r e p l y d a t e d 0 2 . 0 8 . 2 0 1 9 i n r e s p o n se t o n o ti c e d a te d 0 1 . 0 8 . 2 0 1 9 . 3 ) C o p y o f l e t te r d a te d 1 6 . 0 7 . 2 0 1 9 f i l e d d u r i n g A s se s s m e n t P r o c e e d i n g s f o r A . Y . 2 0 1 7 - 1 8 . 4 ) C o p y o f A s se s s m e n t O r d e r d a t e d 0 6 . 0 9 . 2 0 1 9 p a s se d u / s 1 4 3 ( 3 ) o f th e A c t f o r A . Y . 2 0 1 7 - 1 8 . Relating to assessment year 2018-19 the documents were placed at paper book page no.49- 79 as under: 1 ) C o p y of n o t i c e d a t e d 2 2 . 0 9 . 2 0 1 9 i s su e d u / s 1 4 3 ( 2 ) of In c o me T ax A c t f o r A . Y . 2 0 1 8 - 1 9 . 2 ) C o p y of r e p l y d a t e d 0 3 . 1 0 . 2 0 1 9 f i l e d wi th A s se s s i n g Of f i c e r i n A s se s s me n t P r o c e e d i n g s f or A . Y . 2 0 1 8 - 1 9 . 3 ) C o p y of n o ti c e d a t e d 2 7 . 0 1 . 2 0 2 0 f o r A . Y 2 0 1 8 - 1 9 i s su e d b y t h e A s se s s i n g Of f i c e r. ITA No.65,66 & 66/Chd/2021 A.Y. 2016-17 Page 8 of 15 8 4 ) C o p y of r e p l y d t. 0 6 . 0 2 . 2 0 2 0 f i l e d wi th A s se s s i n g Of f i c e r f o r A . Y . 2 0 1 8 - 1 9 . 5 ) C o p y o f N o ti c e d a te d 2 5 . 0 2 . 2 0 2 0 i s su e d u / s 1 4 2 ( 1 ) of In c o me T ax A c t f o r A . Y . 2 0 1 8 - 1 9 . 6 ) C o p y of r e p l y d a te d 2 6 . 0 2 . 2 0 2 0 f i l e d d u r i n g th e A s s e s s m e n t p r o c e e d i n g s f o r A . Y . 2 0 1 8 - 1 9 . 7 ) C o p y o f A s se s s m e n t O r d e r d a t e d 2 5 . 1 1 . 2 0 2 0 p a s se d u / s 1 4 3 ( 3 ) o f th e A c t. 7. The Ld.Counsel for the assessee, therefore, stated that the issue requiring examination in the limited scrutiny assessment proceedings had been replied to the satisfaction of the AO by the assessee not only for the impugned year but also in the preceding and succeeding years and had been accepted in the said years also. He, therefore, stated that there was no reason to hold any error having crept in the order of the AO by way of non-examination of the issue of investment in M/s Crownstar Ltd.. He, further stated the Ld. Pr.CIT has found the order erroneous since the AO had failed to examine the business activities of M/s Crownstar Ltd., which he pointed out, the assessee had explained the nature of business activities carried out by M/s Crownstar Ltd. in the assessment proceedings relating to assessment year 2017-18 as indulging in the trading in bonds, equity as well as financial security of all types. Our attention was drawn to Paper Book page No.44 being the reply of the ITA No.65,66 & 66/Chd/2021 A.Y. 2016-17 Page 9 of 15 9 assessee dated 02.08.2019 in assessment proceedings for assessment year 2017-18 stating the above facts. He, therefore, stated that the nature of business activities of M/s Crownstar Ltd. was also part of record of the assessee and there was, therefore, no merit in the finding of the Ld. Pr.CIT that the business activities of M/s Crownstar Ltd. had not been looked into by the AO. He alternatively contended that in any case, the non-examination of the issue of investment made by the assessee, though vehemently denied, does not cause any prejudice to the interest of the Revenue and, therefore also, he stated that the order of the Ld. Pr.CIT passed u/s 263 of the Act, was not sustainable in law. 8. The Ld. DR, on the other hand, relied upon the order of the Ld. Pr.CIT and further pointed out that despite the assessee filing documents, being the share certificate issued to it by M/s Crownstar Ltd., the AO had failed to inquire further into articles and Memorandum of Association of the said company as per which the said certificates were issued and this non-inquiry had resulted in the error in the order of the AO. He further elaborated his contention by stating that the inquiry in the articles and Memorandum of ITA No.65,66 & 66/Chd/2021 A.Y. 2016-17 Page 10 of 15 10 Association of M/s Crownstar Ltd., a company situated in U.K. would have revealed the background and legal framework in which the company was operating there and in turn would have revealed any benefit resulting to the assessee as a consequence thereof. 9. To this, the Ld.Counsel for the assessee countered by stating that the powers u/s 263 of the Act could not be exercised for making fishing and roving inquiries and there has to be specific findings of error in the order of the Ld. Pr.CIT. 10. Having heard the contentions of both the parties and having gone through the documents filed by both the parties, we hold that the exercise of jurisdiction by the Ld. Pr.CIT to revise the order of the AO in the present case is not sustainable in law on account of his abject failure to point out any error in the order of the AO. The facts on record demonstrate that the assessment was initiated for the limited purpose of inquiring whether the foreign investments made by the assessee were duly disclosed as also the income therefrom. The replies filed by the assessee during assessment proceedings completely satisfied this purpose of inquiry, disclosing the investments made by the assessee in ITA No.65,66 & 66/Chd/2021 A.Y. 2016-17 Page 11 of 15 11 M/s Crownstar Ltd., U.K. in its Balance Sheet and also in its income tax return. IN fact, the assessee has also disclosed the source of investment made in the said company as being from loan given by it to M/s Abhilash Growth Pvt. Ltd. returned to it during the year and has evidenced/substantiated the same with copy of ledger account of M/s Abhilash Pvt. Ltd. and also the bank statement of the assessee reflecting the transaction. There is no iota of doubt, therefore, that the issue which was required to be examined during assessment proceedings was duly replied to by the assessee and substantiated with evidence and the AO, it can be unhesitatingly said, was rightly satisfied with the reply of the assessee. No anomaly in the replies filed by the assessee has been pointed out, by the Ld. Pr.CIT.to cast any doubt on the nature of the transaction The only grievance is that the AO had not inquired into the nature of the business activities carried out by M/s Crownstar Ltd.. This error pointed out by the Ld. Pr.CIT, we find, is totally misplaced. First and foremost this was not the purpose for the limited scrutiny assessment, which only required the AO to inquire whether the investment were duly disclosed. The AO having examined the same, he was not required to go beyond the ITA No.65,66 & 66/Chd/2021 A.Y. 2016-17 Page 12 of 15 12 stated purpose. The assessment order cannot be said to be erroneous therefore for not having examined an issue which it was not required to. Even otherwise, we find that the nature of the business activities carried out by M/s Crownstar Ltd. had been stated by the assessee in the assessment proceedings relating to assessment year 2017- 18 and was very much part of the record of the assessee. For this reason also, the finding of error by the Ld. Pr.CIT of not having inquired into the nature of business activities of M/s Crownstar Ltd. is totally misplaced. As for the income earned by the assessee from the said investment not being inquired into by the Ld. Pr.CIT, the assessee, we find, had stated to the Ld.Pr.CIT that no income had been earned and had also substantiated the same with his financial statements disclosing so. Nothing has been pointed out by the Ld. Pr.CIT to doubt this explanation of the assessee calling for further investigation into it. 11. Therefore, in view of the above, we hold that the Ld. Pr.CIT has failed to point out any error in the order of the AO and the revisionary power exercised by him, therefore, u/s 263 of the Act is not sustainable in law. The contention of the Ld. DR that since the AO had failed to look into the ITA No.65,66 & 66/Chd/2021 A.Y. 2016-17 Page 13 of 15 13 articles and Memorandum of Association of M/s Crownstar Ltd. which may have revealed certain benefit accruing to the assessee, we find, merits no consideration, for the reason that the Ld. Pr.CIT has not specifically referred to this aspect in his order passed u/s 263 of the Act. The Ld. DR cannot expand the scope of the order in his arguments before us. Even otherwise, exercise of revisionary powers requires a specific finding of error in the order of the AO and cannot be exercised on surmises and conjectures that the inquiry, if conducted, would have revealed prejudice caused to the Revenue. There has to be a specific finding that non- inquiry had resulted in a prejudice being caused to the Revenue and section 263 of the Act itself empowers the Pr. CIT to conduct inquiries and arrive at this findings. He cannot exercise his revisionary power to restore the matter to the AO for arrive at this finding of error. In view of the above, we set aside the order of the Ld.Pr.CIT finding no error pointed out by him in the order passed by the AO. 12. It is relevant to mention here that the facts and circumstances in remaining other appeals of the two assessees in ITA No.66/Chd/2021 and ITA No.67/Chd/2021 ITA No.65,66 & 66/Chd/2021 A.Y. 2016-17 Page 14 of 15 14 are admittedly similar to the facts of the present assessee in ITA No.65/Chd/2021, with the only difference in facts pointed out by the Ld.DR being the date of making investments in the company M/s Crownstar, though made in the impugned year only. The said fact is not material enough to alter /effect our decision since the fact remains that the issue was duly examined during assessment proceedings and there was no finding of error as such by the Ld.Pr.CIT in the order passed by the AO. Therefore, our decision rendered therein will apply mutatis mutandis to the other two appeals also. In view of the above, therefore, we set aside the order of the Pr. CIT passed u/s 263 of the Act in all the impugned appeals before us. 13. In the result, the above appeals of all the assessees are allowed. Order pronounced in open court on 22/12/2021. Sd/- Sd/- एन.के . ' न (N.K. CHOUDHRY ) (ANNAPURNA GUPTA) )क !" /Judicial Member े !" /Accountant Member +!न %क /Dated: 22/12/2021 * ी* ITA No.65,66 & 66/Chd/2021 A.Y. 2016-17 Page 15 of 15 15 ' * + , - , / Copy of the order forwarded to : 1. / The Appellant 2. / The Respondent 3. # . / CIT 4. # . ( )/ The CIT(A) 5. , / 0 1 , % 1 , 234 05/ DR, ITAT, CHANDIGARH 6. 0 4 6 $ / Guard File ' * # स / By order, सह ंज / Assistant Registrar