M/s. Camerich Papers Pvt. Ltd., Morbi V. The Pr. CIT-1, Rajkot, Rajkot

ITA 85/RJT/2021

• Counselvise Citation: [2024] 130 COUNSELVISE.COM (IT) 4397 (ITAT-RAJKOT)
• Duration Of Justice: 3 year(s) 3 month(s) 12 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 04-09-2024
• Appeal Filed By: Assessee
• Order Result: Dismissed
• Bench Allotted: DB
• Next Hearing Date: 26-06-2024
• Assessment Year: 2016-2017
• Appeal Filed On: 23-05-2021
• Result in Favour of: Revenue
• Court: TRIBUNAL
• Department Lawyers: SHRAMDEEP SINHA
• Keywords: Set aside; Opportunity of being heard; Earning of tax free income; Revision of order
• Section: 143(3); 263; 48; 68; 13

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL, RAJKOT BENCH, RAJKOT BEFORE DR. ARJUN LAL SAINI, ACCOUNTANT MEMBER AND SHRI DINESH MOHAN SINHA, JUDICIAL MEMBER आयकर अपील सं./ITA No. 85/RJT/2021 (Assessment Year: 2016-17) (Hybrid Hearing) M/s. Camerich Papers Pvt. Ltd., 229, Kohinoor Complex, Ravapar Road, Canal Char Rasta, Morbi-363641 Vs. The PCIT-1, Rajkot थायीलेखासं./जीआइआरसं./PAN/GIR No.: AAFCC7833F (अपीलाथ /Appellant) ( यथ /Respondent) नधा रतीक ओरसे / Assessee by : None राज वक ओरसे/Revenue by : Shri Shramdeep Sinha, CIT-D.R. स ु नवाईक तार ख/ Date of Hearing : 27/06/2024 घोषणाक तार ख/Date of Pronouncement : 05/09/2024 आदेश/ORDER PER DINESH MOHAN SINHA, JM: Captioned appeal filed by the Assessee for A.Y. 2016-17, is directed against the order passed by the Learned Principal Commissioner of Income Tax PCIT, Rajkot-1, dated 24.03.2021 under section 263 of the Income Tax Act, 1961 (in short, ‘the Act’). 2. None appeared on behalf of the assessee despite of several notice given to the Assessee that the case was put up for hearing 13 times. We have heard the Ld. D.R. The grounds of appeal are reproduced below: I.T.A No. 85/Rjt/2021 A.Y. 2016-17 M/s. Camerich Papers Pvt. Ltd. vs. Pr. CIT-1 2 “1. On the facts and in the circumstances of the case, the order passed by the learned PCIT 1 Rajkot u/s.263 of the I.T. Act is ab initio void being bad in law. 2. On the facts and in the circumstances of the case, the learned PCIT erred in arriving at a conclusion to the effect that the assessment order passed by the Assessing Officer was erroneous as well as prejudicial to the interest of the revenue on the ground that such order was passed without making proper enquiries. 3. On the facts and in the circumstance of the case, the learned CIT erred in setting aside the assessment order dated 18/12/2018 passed u/s.143(3) of the I.T. Act, directing the Assessing Officer to pass a fresh assessment order. 4. The appellant craves leave to add, alter, amend and/or withdraw any ground or grounds of appeal either before or during the course of hearing of the appeal.” 3. The brief facts of the case are that the assessee filed his return of income on 13/10/2016 showing therein income of Rs. NIL/-. The case has been selected for Limited Scrutiny (CASS) to examine: 1) Whether tax aspects related to investments / advances / loans have been considered in the return of income; 2) Whether the share capital is genuine and from disclosed sources; The assessment was finalized u/s 143(3) of the Act on 18-12-2018 accepting return income Rs.NIL. 4. On perusal of record, it is seen that during the previous year 2015-16 relevant to A.Y 2016-17, the assessee had issued 2,30,99,000 equity shares at Rs.10 each raising equity share capital of Rs.23,09,90,000/- and total 49 persons/ entities have subscribed to the Share Capital. Regarding these share application money, the assessee furnished copies of ITR-Vs, bank Statements, balance sheets and profit and loss accounts of such share applicants to the AO. I.T.A No. 85/Rjt/2021 A.Y. 2016-17 M/s. Camerich Papers Pvt. Ltd. vs. Pr. CIT-1 3 5. On further perusal of the details uploaded by the assessee, it is noted that some share holders claimed to have invested amounts which are even more than 20 times their returned income. For instance, 1) Shri Budsana Vishalbhai Rameshbhai invested Rs.42,00,000/- in shares of the assess company and given Rs. 14,95,000/- as unsecured loan during the year while his returned income for AY 2016-17 is only Rs. 2,46,320/- is one such glaring example. 2) Shri Arjun Savajibhai Sitapara invested Rs.2,53,75,000/- in shares of the assessee company during the year while his returned income for AY 2016-17 is only Rs. 3,59,230/- is another such glaring example. 3) Shri Shantilal Lavjibhai Chhatrola invested Rs.37,50,000/- in shares of the assessee company and given Rs.21,50,000/- as unsecured loan during the year while his returned income for AY 2016-17 is only Rs. 41,690 plus Rs. 2,77,757 being exempt income is one more example. These are some examples just for illustrative purpose. There are many such similar examples. Even in such glaring instances, the AO has not examined the nature and source of money in the hands of these persons. 6. First proviso to sec. 68 of the act clearly provides that in respect of share capital, explanation offered by the assessee- company shall be deemed to be not satisfactory unless the share holders offers explanation about the nature and source of such investment and the AO is satisfied about such explanation. First proviso to sec. 68 of the act as under:- "provided that where the assessee is a company ( not being a company in which the public are substantially intestest), and the sum so credited consist of share application money, share capital, where premium or any such amount by whatever name called, any explanation offered by such assessee-company shall be deemed to be not satisfactory, unless- I.T.A No. 85/Rjt/2021 A.Y. 2016-17 M/s. Camerich Papers Pvt. Ltd. vs. Pr. CIT-1 4 1. 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 2. Such explanation in the opinion of the assessing officer aforesaid has been found to be satisfactory." 7. In the present case, no explanation of the person whose name is recorded in the books of the assessee-company against share capital is available on record for the nature and source of investment. It is thus seen that the AO accepted the claim of genuineness of Share Capital Investment without making inquiries or verification of the claim, as prescribed in clause (a) & (b) of first proviso to sec.68 of the Act. Further, from the enclosed Chart containing the summary of details uploaded during the assessment proceedings; it is clearly evident that the assessee has not provided Confirmation or Contra ledger from even a single person from whom it has received money either as share application. Thus, it can be said that the AO has not carried out even preliminary inquiries in this regard and accepted the entire Share Capital Investment as genuine. 8. Further, in respect of cases where Balance Sheets were filed and visible, it is seen that these investors have staked up huge loans on their personal balance sheets which is even higher than their own capital in some cases. For example, 1) Shri Ramnikbhai Jivanbhai Julasna (Sr.No.19 of the Chart), on his personal Balance sheet he has reported Rs. 5.76 Lacs of own fund (i.e. capital) and Rs. 84.68 Laks borrowed fund (i.e as unsec. Loans) and has invested Rs. 50,00,000/- in Equity shares of the assessee company. 2) Arjun Savjibhai Sitapara (Sr. No. 34 of the Chart), on his personal Balance sheet he has reported Rs. 26.44 Lacs of own fund (i.e. capital) and Rs. 3.07 Crs of borrowed fund (i.e. as unsec. Loans) and has invested Rs.2,53,75,000/- in Equity shares of the assessee company. Further, as I.T.A No. 85/Rjt/2021 A.Y. 2016-17 M/s. Camerich Papers Pvt. Ltd. vs. Pr. CIT-1 5 noted earlier no interest has been paid / claimed as expenditure in the computation of income by these persons which is quite strange. These glaring discrepancies should have raised the antenna of the AO and he should have conducted necessary enquiries/ verifications. However, the AO accepted the share capital investment without verification / inquiries that should have been made. 9. It is evident from the facts of the case that the AO, who is duty bound to verify and enquire/investigate the identity and creditworthiness of the shareholders and ascertain whether the transaction is genuine, or not, has failed to conduct enquiries / verifications that should have been made and accepted the share capital as genuine. 10. The above judgments made it clear beyond doubt that courts are not required to look into the object or intention of the Legislature by resorting aids to interpretation where the language of the provision is clear and unambiguous. Consequently, the meaning of each word used by the Legislature is to be given its plain and natural meaning and no word should be ignored while interpreting a provision of a statute. Keeping in view the said judgment it may be mentioned that the provisions of section 68 of the I.T. Act are very clear and unobvious and if any sum is found credited in the books of account of the assessee for which proper explanation is not furnished by the assessee then such sum is to be treated as undisclosed income of the assessee. Therefore, addition, if any, was to be made u/s. 68 of I.T. Act, the same was to be made in the case of company itself. 11. It may be also mentioned that the Hon’ble Supreme Court in the case of PCIT Central-1 vs. NRA (Iron & steel Pvt. Ltd.) [2019] 103 taxmann.com 48 vide order dtd. 05.03.2019 has upheld the addition of share capital/premium in the hands of assessee company. I.T.A No. 85/Rjt/2021 A.Y. 2016-17 M/s. Camerich Papers Pvt. Ltd. vs. Pr. CIT-1 6 12. Keeping in view the above facts, the PCIT hold that the assessment order dtd. 18.12.2018 finalized by the assessing officer is erroneous and prejudicial to the interest of Revenue within the meaning of sec. 263 of the I.T. Act and hence the order passed by the assessing officer is hereby set aside. The A.O. is directed to make a fresh assessment de-novo considering the observation and discussions on these issues discussed in the above paras, making necessary interpretations and in depth inquiries and after allowing adequate opportunity of being heard to the assessee. 13. Vide the taxation and other laws (relaxation of certain provisions) Ordinance, 2020 promulgated on March 31, 2020, the time limit for completion of the proceedings has been extended up to June 30, 2020 or such other date after June 30, 2020 which the Central Government may notify. Subsequently, the CBDT vide Notification dated 24 th June, 2020 extended the time limit up to 31-03- 2021 for completion of the proceedings. Accordingly, the time limit for completion of the proceedings u/s 263 expiring on 31-03-2020 got extended up to 31-03-2021. 14. The issue whether the assessee's case covered under the provisions of 263 of the Act is to be examined. Ld. D.R. has drawn our attention on the issue that Ld. PCIT observed by the Ld. AO without conducting proper inquiry allowed the claim of the assessee in respect of share capital. In this way, the assessment order dated 18-12-2018 is erroneous order and prejudicial to the interest of revenue. For such proposition of law reliance is placed on the following case laws:- i. CIT v. Kamal Galani, 2018 ITL 1562(Gujarat) ii. Deniel Merchants Pvt. Ltd. vs. ITO (Appeal No. 2396/2017) dated 29.11.2017(SC). I.T.A No. 85/Rjt/2021 A.Y. 2016-17 M/s. Camerich Papers Pvt. Ltd. vs. Pr. CIT-1 7 15. In view of the above we find merit in the order u/s. 263 of the Act passed by Ld. PCIT u/s. 263 of the Act. Therefore, we dismiss the appeal of the assessee. 16. In the result, the appeal of the assessee is dismissed. Order pronounced in the open court on 05-09-2024 Sd/- Sd/- (Dr. A. L. SAINI) (DINESH MOHAN SINHA) ACCOUNTANT MEMBER JUDICIAL MEMBER Rajkot Dated: 05/09/2024 TRUE COPY आदेश क त ल प अ े षत / Copy of Order Forwarded to:- 1. Assessee, 2. Revenue, 3. Concerned CIT, 4. CIT(A), 5. DR, ITAT, Rajkot, 6. Guard file. By order/आदेश से, Assistant Registrar/Sr. P.S./P.S. ITAT, Rajkot