ANNU AGROTECH PRIVATE LIMITED, KOTA V. PR.CIT, UDIAIPUR

ITA 9/JPR/2021

• Counselvise Citation: [2021] 107 COUNSELVISE.COM (IT) 6015 (ITAT-JAIPUR)
• Duration Of Justice: 5 month(s) 30 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 15-09-2021
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: B
• Assessment Year: 2016-2017
• Appeal Filed On: 16-03-2021
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Assessee Lawyers: DEVANG GARGIEYA ITP
• Keywords: Business income; Revision of order; Opportunity of being heard; Earning of tax free income; Source of fund; Tangible material; Fair market value; Difference of opinion; Competent authority; Assessment record; Prejudicial to interest; Onus to prove; Change of opinion; Revenue expenditure; Set aside; Bogus
• Section: 68; 263; 143(3); 142(1); 14A; 195; 143(2); 43; 48; 2(A); 13; 22; 20

Judgement Text

VK;DJ VIHYH; VF/KDJ.K] T;IQJ U;K;IHB] T;IQJ IN THE INCOME TAX APPELLATE TRIBUNAL, JAIPUR BENCHE S B, JAIPUR JH LANHI XLKA] U;KF;D LNL; ,OA JH FOE FLAG ;KNO ] YS[KK LNL; DS LE{K BEFORE SHRI SANDEEP GOSAIN, JM & SHRI VIKRAM SINGH YADAV, AM VK;DJ VIHY LA-@ ITA NO. 09/JP/2021 ASSESSMENT YEAR: 2016-17 ANNU AGROTECH PRIVATE LIMITED, S-47/48, S-47/48, COMMERCIAL SHOPS, IPIA 324005, RAJASTHAN, INDIA. CUKE VS. PR.CIT, UDAIPUR. PAN NO.: AAGCA 5903 M VIHYKFKHZ@ APPELLANT IZR;FKHZ@ RESPONDENT FU/KZKFJRH DH VKSJ LS@ ASSESSEE BY : SHRI MAHENDRA GARGIEYA(ADV.) & SHRI DEVANG GARGIEYA (ITP) JKTLO DH VKSJ LS@ REVENUE BY : SHRI B.K. GUPTA (PR.CIT-DR) LQUOKBZ DH RKJH[K@ DATE OF HEARING : 27/07/2021 MN?KKS'K.KK DH RKJH[K @ DATE OF PRONOUNCEMENT : 15 /09/2021 VKNS'K@ ORDER PER: SANDEEP GOSAIN, J.M. THE PRESENT APPEAL HAS BEEN FILED BY THE ASSESSEE A GAINST THE ORDER OF THE LD. PR.CIT, UDAIPUR DATED 11/02/2021 P ASSED U/S 263 OF THE INCOME TAX ACT, 1961 (IN SHORT, THE ACT) FOR THE A. Y. 2016-17. THE ASSESSEE HAS RAISED FOLLOWING GROUNDS OF APPEAL: 1. THE LD. PR. CIT, SERIOUSLY ERRED IN LAW AS WELL AS ON THE FACTS OF THE CASE IN INVOKING THE PROVISIONS OF SEC. 263 OF THE ACT AND THEREFORE, THE IMPUGNED ORDER DATED 11.02.2021 U/S 263 OF THE ACT KINDLY BE QUASHED. 2. THE LD. PR. CIT SERIOUSLY ERRED IN LAW AS WELL A S ON THE FACTS OF THE CASE IN ASSUMING JURISDICTION U/S 263 OF THE AC T WITHOUT ITA 09/JP/2021_ ANNU AGROTECH P LTD. VS PR.CIT 2 RECORDING A SPECIFIC AND CATEGORICAL FINDING THAT T HE SUBJECTED ASSESSMENT ORDER PASSED U/S 143(3) DATED 16.11.2018 IS ERRONEOUS AND PREJUDICIAL TO THE INTEREST OF THE RE VENUE, IN ABSENCE OF WHICH THE ENTIRE PROCEEDINGS U/S 263 IS VITIATED. THEREFORE, THE IMPUGNED ORDER DATED 11.02.2021 U/S 263 OF THE ACT KINDLY BE QUASHED. 3. THE LD. PR. CIT SERIOUSLY ERRED IN LAW AS WELL A S ON THE FACTS OF THE CASE IN ASSUMING JURISDICTION U/S 263 OF THE ACT BY WRONGLY AND INCORRECTLY HOLDING THAT THE SUBJECTED ASSESSMENT O RDER U/S 143(3) DATED 16.11.2018, WAS PASSED WITHOUT MAKING PROPER ENQUIRIES OR VERIFICATION W.R.T.: (A) ALLOTMENT OF 1,80,000 SHARES OF FACE VALUE @ RS . 10/- WITH PREMIUM @ RS. 50/- PER SHARE FOR TOTAL CONSIDE RATION OF RS. 1.08 CRORE U/S 68 PROVISO AND, (B) RECEIPT OF LARGE SHARE PREMIUM U/S 56(2)(VII) A ND ANY OTHER RELEVANT SECTION OF THE ACT. WITH A DIRECTION TO THE AO TO PROPERLY EXAMINE THE IDENTITY (TYPED AS ENTITIES) 85 CREDITWORTHINESS OF THE SHAREHOLDER S/INVESTORS AND ALSO GENUINENESS OF THE TRANSACTIONS AND ALSO TO EX AMINE APPLICABILITY OF S. 56(2)(VIIB) OF LARGE SHARE PREM IUM AND ANY OTHER RELEVANT SECTION OF THE ACT AND ALSO TO MAKE NECESSARY ADDITIONS TO THE TOTAL INCOME OR U/S 115JB(1) OF TH E ACT, WHEREVER REQUIRED. THE ASSUMPTION OF JURISDICTION - U/S 263 AND THE DIRECTIONS SO GIVEN THERE UNDER, BEING CONTRARY TO THE PROVISIONS OF LAW AND FACTS ON RECORD HENCE, THE PROCEEDINGS INITIATED U/ S 263 OF THE ACT AND THE IMPUGNED ORDER DATED 11.02.2021 DESERVES TO BE QUASHED. 4. THE LD. PR. CIT ERRED IN LAW AS WELL AS ON THE F ACTS OF THE CASE IN WRONGLY SETTING ASIDE THE ASSESSMENT ORDER DATED 16 .11.2018 DESPITE THERE BEING COMPLETE APPLICATION OF MIND BY THE AO ON THE SUBJECTED ISSUES AND IT WAS NOTHING BUT A CASE OF CHANGE OF OPINION, BASED ON WHICH, ASSUMPTION OF JURISDICTION U/S 263 IS NOT PERMISSIBLE. THE IMPUGNED ORDER DATED 11.02.202 1 ITA 09/JP/2021_ ANNU AGROTECH P LTD. VS PR.CIT 3 THEREFORE, LACKS VALID JURISDICTION U/S 263 OF THE ACT AND HENCE, THE SAME KINDLY BE QUASHED. 5. THE LD. PR. CIT SERIOUSLY ERRED IN LAW AS WELL A S ON THE FACTS OF THE CASE IN ASSUMING JURISDICTION U/S 263 OF THE ACT BY WRONGLY AND INCORRECTLY INVOKING EXPLANATION 2 TO S. 263 AS IF THE SAME CONFERRED UNBRIDLED POWER UPON THE CIT EVEN THOUGH THE FACTS AND CIRCUMSTANCES OF THE CASE DID NOT JUSTIFY THE A PPLICATION OF THE SAID EXPLANATION. 6. ALTERNATIVELY AND WITHOUT PREJUDICE TO THE ABOVE THE LD. PR. CIT ERRED IN LAW AS WELL ON THE FACTS O F THE CASE IN HOLDING THAT THE CONSIDERATION RECEIVED BY THE APPE LLANT COMPANY ON ISSUE OF SHARES WAS IN EXCESS OF THE FAIR MARKET VALUE BY RS. 3,11,400/- HENCE, IS REQUIRED TO BE ADDED TO THE TO TAL INCOME U/S 56(2)(VIIB) OF THE ACT. HENCE, THE IMPUGNED FINDING THAT THE ASSESSMENT ORD ER PASSED U/S 143(3) 16.11.2018 WAS ERRONEOUS AND PREJUDICIAL TO THE INTEREST OF THE REVENUE TO THE EXTENT OF SHORT ASSE SSMENT OF RS. 3,11,400/-, DESERVES TO BE COMPLETELY QUASHED AND S ET-ASIDE. 7. THE APPELLANT PRAYS YOUR HONOR INDULGENCES TO AD D, AMEND OR ALTER OF OR ANY OF THE GROUNDS OF THE APPEAL ON OR BEFORE THE DATE OF HEARING. 2. THE HEARING OF THE APPEAL WAS CONCLUDED THROUGH VIDEO CONFERENCE IN VIEW OF THE PREVAILING SITUATION OF COVID-19 PAN DEMIC. 3. THE BRIEF FACTS OF THE CASE ARE THAT THE ASSESSE IS A PRIVATE LIMITED COMPANY, DERIVED INCOME FROM GRADING, CLEANING AND STORAGE OF AGRICULTURE COMMODITY. THE ASSESSEE HAD FILED ITS R ETURN OF INCOME FOR YEAR UNDER CONSIDERATION ON 14.10.2016 DECLARING TO TAL INCOME OF RS. 2,07,940/- AND BOOK PROFIT DECLARED AT RS. 2,15,690 /- U/S 115JB(2) OF THE ITA 09/JP/2021_ ANNU AGROTECH P LTD. VS PR.CIT 4 ACT WITH TAX INCLUDING INTEREST OF RS. 41,100/ U/S 115JB(1) OF THE ACT. THEREAFTER, THE CASE OF THE ASSESSEE WAS SELECTED F OR SCRUTINY BY CASS UNDER LIMITED SCRUTINY FOR THE REASON THAT WHETHER THE FUNDS RECEIVED IN THE FORM OF SHARE PREMIUM ARE FROM DISCLOSED SOURCE S AND HAVE BEEN CORRECTLY OFFERED TO TAX. THEREAFTER, VARIOUS OTHE R NECESSARY NOTICES WERE ISSUED AND AFTER CONSIDERING THE REQUIRED INFORMATI ON AND DOCUMENTS, THE A.O. ACCEPTED THE RETURNED INCOME FILED BY THE ASSE SSEE. LATER ON, THROUGH SHOW CAUSE NOTICE DATED 13.01.2021, IT WAS PROPOSED TO INVOKE REVISIONAL PROCEEDINGS U/S 263 OF THE ACT ON THE GR OUND THAT CAPTIONED ASSESSMENT ORDER DATED 16.11.2018 PASSED BY THE AO IS ERRONEOUS IN SO FAR AS PREJUDICIAL TO THE INTEREST OF REVENUE BECAU SE THE AO DID NOT VERIFY /EXAMINE THE ISSUES WHICH HE OUGHT TO HAVE MADE, BY OBSERVING AS UNDER: 2. THEREAFTER, ON EXAMINATION OF RECORDS BY THE UN DERSIGNED IT IS SEEN THAT THE ASSESSEE COMPANY HAD ISSUED 1,80,000 SHARES AT FACE VALUE OF RS. 10/- AND AS PER SHARE PREMIUM OF RS. 50/-. THUS, THE ASSESSEE C OMPANY HAD RECEIVED A TOTAL CONSIDERATION OF RS. 1,08,00,000/- IN F.Y. 2015-16 RELEVANT TO A.Y. 2016-17. 2.1 THE DETAILED BREAKUP OF ISSUED SHARES TO WHOM THE S HARES HAVE BEEN ALLOTTED IS MENTIONED AS UNDER:- S.NO. NAME OF SHARE HOLDER NO. OF SHARES ISSUED DURING THE YEAR AMOUNT OF TOTAL SHARES 1. SMT. CHELNA DEVI JAIN 63475 30,08,500/- ITA 09/JP/2021_ ANNU AGROTECH P LTD. VS PR.CIT 5 2. SH. MANOHAR LAL JAIN 28900 17,34,000/- 3. SH. DHARM CHAND JAIN 87625 52,57,500/- TOTAL 180000 1,08,00,000/- 2.2 DURING THE ASSESSMENT PROCEEDINGS, THE ASSESSEE COM PANY WAS ASKED BY THE AO VIDE HIS NOTICE U/S 142(1) DATED 25.06.2018 TO EXPLAIN WITH SUPPORTING DOCUMENTS THAT WHETHER THE FUNDS RECEIVED IN THE FO RM OF SHARE PREMIUM ARE FROM DISCLOSED SOURCES AND HAVE BEEN CORRECTLY OFFE RED TO TAX. IN RESPONSE, THE ASSESSEE COMPANY SUBMITTED VIDE REPLY DATED 08.08.2 018 THAT THE ASSESSEE COMPANY HAD ISSUED SHARES AT PREMIUM OF RS. 50/-. H OWEVER, THE ASSESSEE COMPANY SUBMITTED ONLY BANK ACCOUNT NUMBER AND NAME OF THE BANK TO THE AO. 2.3 FURTHER, THE ASSESSEE COMPANY WAS ASKED BY THE AO V IDE NOTICE U/S 142(1) OF THE I.T. ACT DATED 09.09.2018 TO PROVE TH E GENUINENESS AND CREDITWORTHINESS REGARDING RECEIPT OF SHARE CAPITAL AND SHARE PREMIUM. THE ASSESSEE COMPANY SUBMITTED CONFIRMATION OF SHARE TR ANSACTION ACCOUNT ON 22.10.2018. THE ASSESSE COMPANY HAD ALSO SUBMITTED ACKNOWLEDGEMENT OF ITR SHOWING INCOME OF RS. 10,72,700/-, RS. 5,23,430/- A ND RS. 5,26,550/- IN THE CASES OF SMT. CHELNA DEVI JAIN, SH. MANOHAR LAL SHAH AND SH. DHARM CHAND JAIN AND WHEREAS THEY HAD MADE THE INVESTMENT OF RS. 30,08,5 00/-, RS. 17,34,000/- AND RS. 52,57,500/- RESPECTIVELY. BUT THE ASSESSEE COMP ANY HAD NEITHER SUBMITTED ITS OWN BANK ACCOUNT NOR THE BANK ACCOUNTS OF THE PERSO NS WHO HAD MADE INVESTMENT IN SHARES. AGAIN, THE ASSESSEE COMPANY H AD ALSO NOT SUBMITTED CAPITAL ACCOUNT OF THE INVESTORS. AGAIN, NONE OF TH E INVESTORS PRODUCED THE BANK STATEMENTS TO ESTABLISH THE SOURCE OF FUNDS FOR MAK ING SUCH A HUGE INVESTMENT IN THE SHARES, EVEN THOUGH THEY WERE DECLARING A MEAGE R INCOME IN THE RETURNS. THUS, THE ASSESSEE COMPANY FAILED TO DISCHARGE THE ONUS BY FILING COGENT EVIDENCE FOR CREDITWORTHINESS OF THE INVESTORS AND GENUINENESS OF TRANSACTIONS. THE SHARE APPLICATION MONEY RECEIVED BY THE ASSESSE E COMPANY DURING THE YEAR HAS NOT BEEN SUBJECT TO EXAMINATION ON THE TRIPLE T ESTS OF IDENTITY, ITA 09/JP/2021_ ANNU AGROTECH P LTD. VS PR.CIT 6 CREDITWORTHINESS AND GENUINENESS. IN OTHER WORDS, T HE AO HAS NOT EXAMINED THE IDENTITY, CREDITWORTHINESS OF THE SHAREHOLDERS / IN VESTORS AND ALSO THE GENUINENESS OF TRANSACTIONS IN RESPECT OF TOTAL AMO UNT OF SHARES OF RS. 1,08,00,000/- AND BECAUSE OF THE SAME, THE ASSESSME NT ORDER U/S 143(3) OF THE I.T. ACT IN THE CASE OF ASSESSEE COMPANY FOR A.Y. 2 016-17 IS FOUND TO BE ERRONEOUS IN SO FAR AS IT IS PREJUDICIAL TO THE INTEREST OF R EVENUE. THE LD. PR.CIT, THEREAFTER, REFERRED TO THE FIRST P ROVISO TO S.68 INSERTED W.E.F A.Y. 2013-14 AND ALLEGED THAT THE AO DID NOT EXAMINE THE IDENTITIES AND CREDITWORTHINESS OF THE SHAREHOLDERS. HE FURTHE R ALLEGED THAT THE AO ALSO DID NOT EXAMINE THE APPLICABILITY OF THE PROVI SIONS OF S. 56(2)(VIIB) OF THE ACT. HE ALLEGED THAT THE AO FAILED TO MAKE PROP ER ENQUIRY IN RESPECT OF CORE ISSUES FOR WHICH THE CASE WAS SELECTED AND SUCH LACK OF ENQUIRY HAS RENDERED THE SUBJECTED ASSESSMENT AS ERRONEOUS. IN RESPONSE, THE ASSESSEE FILED DETAILED WRITTEN SUBMISSION DATED 25 .01.2021BEFORE THE LD. PCIT, UDAIPUR. THE LD. PCIT, HOWEVER FEELING DISSAT ISFIED, REJECTED THE CONTENTIONS AND HELD THE ASSESSMENT ORDER ERRONEOUS AND PREJUDICIAL TO THE INTEREST OF REVENUE, BY HOLDING AS UNDER: 6. I HAVE CAREFULLY EXAMINED THE WRITTEN SUBMISSIO N OF THE ASSESSEE. THE CONTENTIONS OF THE ASSESSEE HAVE BEEN CONSIDERED. I T IS PERTINENT TO MENTION HERE THAT THE VARIOUS ADDITIONAL DOCUMENTARY EVIDEN CES WHICH HAVE BEEN FURNISHED IN COMPLIANCE TO NOTICE U/S 263 OF THE I. T. ACT WERE NOT PRODUCED BEFORE THE AO. THIS BECOMES ALL THE MORE IMPORTANT IN VIEW OF SECTION 68 & THE PROVISO ADDED TO SECTION 68 W.E.F. 01.04.2013. SINC E THE AO HAS NOT EXAMINED THE ENTITIES AND CREDITWORTHINESS OF THE SHAREHOLDE RS / INVESTORS AND ALSO THE ITA 09/JP/2021_ ANNU AGROTECH P LTD. VS PR.CIT 7 GENUINENESS OF TRANSACTIONS AND DUE TO WHICH THE AS SESSMENT ORDER U/S 143(3) OF THE I.T. ACT IS FOUND TO BE ERRONEOUS IN SO FAR AS IT IS PREJUDICIAL TO THE INTEREST OF REVENUE. HOWEVER, IN VIEW OF THE FACTS AND SUBMI SSION OFFERED BY THE ASSESSEE, THIS ISSUE REQUIRES THOROUGH VERIFICATION . THEREFORE, THE AO IS DIRECTED TO CONDUCT NECESSARY VERIFICATION IN RESPECT OF THI S ISSUE BY CALLING FOR RELEVANT DETAILS AND DOCUMENTS FROM THE ASSESSEE, EXAMINING THE BOOKS OF ACCOUNT AND AUDITED BALANCE SHEET OF THE ASSESSEE, CONDUCT INDE PENDENT ENQUIRIES FROM THE PERSONS WHO HAVE CONTRIBUTED TO SHARE CAPITAL / SHA RE PREMIUM AND BASED ON SUCH VERIFICATION ON THIS ISSUE AND IN CASE OF ANY DISCREPANCY, APPROPRIATE ACTION MAY BE TAKEN AS PER LAW. 7. HERE, IT IS USEFUL TO REFER TO THE EXPLANATION-2 BELOW SECTION 263(1) INSERTED W.E.F. 01.06.2015 BY FINANCE ACT, 2015, WHICH PROVI DES THAT: X X X X 8. THE ASSESSMENT ORDER U/S 143(3) OF THE I.T. ACT FOR THE A.Y. 2016-17 DATED 16.11.2018 WAS PASSED BY THE AO IN THIS CASE, WITHO UT MAKING PROPER ENQUIRIES OR DOING ANY VERIFICATION OF THE ISSUE OF LARGE SHA RE PREMIUM RECEIVED BY THE ASSESSEE COMPANY DURING THE YEAR AND THE APPLICABIL ITY OF SECTION 56(2)(VIIB) ANDANY OTHER RELEVANT SECTION AS DISCUSSED IN PRECE DING PARAS, DESPITE BEING THE FACT THAT THIS WAS THE SOLE REASON FOR SCRUTINY SEL ECTION. HENCE, ASSESSMENT ORDER U/S 143(3) OF THE I.T. ACT FOR THE A.Y. 2016- 17 DATED 16.11.2018 HAS THUS BEEN RENDERED ERRONEOUS AND PREJUDICIAL TO INTEREST OF REVENUE ON THE ISSUE OF NON-VERIFICATION LARGE SHARE PREMIUM RECEIVED BY TH E ASSESSEE COMPANY DURING THE YEAR AND THE APPLICABILITY OF 56(2)(VIIB) AND A NY OTHER RELEVANT SECTION OF THE INCOME TAX ACT. THE SAME IS THEREFORE SET-ASIDE / C ANCELLED AND RESTORED BACK TO THE FILE OF AO ON THIS ISSUE, IN VIEW OF THE DETAIL ED DISCUSSION MADE IN PRECEDING PARAS, WITH THE DIRECTION TO PASS FRESH ASSESSMENT ORDER AFTER CONDUCTING PROPER VERIFICATION AND ENQUIRIES ON THE ABOVE ISSUE AND B ASED ON OUTCOME OF SUCH ENQUIRIES, NECESSARY ADDITION WHEREVER REQUIRED MAY BE MADE TO THE TOTAL ITA 09/JP/2021_ ANNU AGROTECH P LTD. VS PR.CIT 8 INCOME AND TO THE BOOK PROFIT U/S 115JB(1) OF THE I .T. ACT OF THE ASSESSEE IN ACCORDANCE WITH THE PROVISIONS OF INCOME TAX ACT AN D INCOME TAX RULES. HOWEVER, AN OPPORTUNITY OF BEING HEARD SHOULD BE GI VEN TO THE ASSESSEE BEFORE PASSING THE ORDER. 4. NOW THE ASSESSEE IS IN APPEAL BEFORE THE ITAT BY TAKING THE ABOVE MENTIONED GROUNDS OF APPEAL. 5. ALL THE GROUNDS TAKEN BY THE ASSESSEE IN THIS AP PEAL ARE INTERRELATED AND INTERCONNECTED BUT THE ASSESSEE IS MAINLY AGGRIEVED BY THE ORDER OF THE LD. PR.CIT FOR PASSING THE ORDER U /S 263 OF THE ACT. IN THIS REGARD, THE LD. AR APPEARING ON BEHALF OF THE ASSESSEE HAS REITERATED THE SAME ARGUMENTS AS WERE RAISED BEFORE THE LD. PR .CIT AND ALSO RELIED UPON THE WRITTEN SUBMISSIONS FILED BEFORE THE BENCH AND THE SAME ARE REPRODUCED BELOW: LEGAL POSITION ON SEC.263 JUDICIAL GUIDELINE: BEF ORE PROCEEDING, WE MAY SUBMIT AS REGARDS THE JUDICIAL GUIDELINE, IN THE LI GHT OF WHICH, THE FACTS OF THIS CASE ARE TO BE APPRECIATED. 1.1 THE PRE-REQUISITES TO THE EXERCISE OF JURISDICTION BY THE CIT U/S 263, IS THAT THE ORDER OF THE AO IS ESTABLISHED TO BE ERRON EOUS IN SO FAR AS IT IS PREJUDICIAL TO THE INTEREST OF THE REVENUE. THE CIT HAS TO BE SATISFIED OF TWIN CONDITIONS, NAMELY: (I) THE ORDER OF THE AO SOUGHT TO BE REVISED IS ERRONEO US; AND, (II) IT IS PREJUDICIAL TO THE INTERESTS OF THE REVENUE. IF ANY ONE OF THEM IS ABSENT I.E. IF THE ASSESSMENT ORDER IS NOT ERRONEOU S BUT IT IS PREJUDICIAL TO THE REVENUE, SEC.263 CANNOT BE INVOKED. ITA 09/JP/2021_ ANNU AGROTECH P LTD. VS PR.CIT 9 THIS PROVISION CANNOT BE INVOKED TO CORRECT EACH AN D EVERY TYPE OF MISTAKE OR ERROR COMMITTED BY THE AO; IT IS ONLY WH EN AN ORDER IS ERRONEOUS AS ALSO PREJUDICIAL TO REVENUES INTEREST , THAT THE PROVISION WILL BE ATTRACTED. AN INCORRECT ASSUMPTION OF THE FACT O R AN INCORRECT APPLICATION OF LAW WILL SATISFY THE REQUIREMENT OF THE ORDER BEING ERRONEOUS. THE PHRASE 'PREJUDICIAL TO THE INTEREST OF THE REVENUE' HAS TO BE READ IN CONJUNCTION WITH AN ERRONEOUS ORDER PASS ED BY THE AO. EVERY LOSS OF REVENUE AS A CONSEQUENCE OF THE ORDER OF TH E AO CANNOT BE TREATED AS PREJUDICIAL TO THE INTEREST OF THE REVEN UE. FOR EXAMPLE, IF THE AO HAS ADOPTED ONE OF THE TWO OR MORE COURSES PERMI SSIBLE IN LAW AND IT HAS RESULTED IN LOSS OF REVENUE, OR WHERE TWO VIEWS ARE POSSIBLE AND AO HAS TAKEN ONE VIEW WITH WHICH THE CIT DOES NOT AGRE E, IT CANNOT BE TREATED AS AN ERRONEOUS ORDER PREJUDICIAL TO THE IN TEREST OF THE REVENUE, UNLESS THE VIEW TAKEN BY THE AO IS TOTALLY UNSUSTAI NABLE IN LAW. KINDLY REFER MALABAR INDUSTRIAL CO. LTD. V/S CIT (2000) 24 3 ITR 83 (SC). 1.2 ALSO KINDLY REFER CIT V/S MAX INDIA LTD. (2007) 295 ITR 282 (SC) WHEREIN IT IS HELD THAT: RATIO OF THESE CASES FULLY APPLY ON THE FACTS OF TH E PRESENT CASE IN PRINCIPLE. 2. DUE APPLICATION OF MIND: 2.1 IT IS SUBMITTED THAT THE AO HAD RAISED VERY SPE CIFIC AND DIRECTLY RELEVANT QUERIES/CALLED FOR EXPLANATION AND EVIDENC ES W.R.T. THE IDENTITIES AND CREDITWORTHINESS GENUINENESS OF THE RECEIPTS TO WARDS THE SHARE PREMIUM OF RS. 1.08 CR AND APPLICABILITY OF OF S.56 (2)(VIIB); TO THE EXTENT HE WAS SUPPOSED TO ACT IN LAW. 2.2 THIS IS ALSO EVIDENT FROM QUERIES RAISED AND TH E REPLIES GIVEN THERETO, REPRODUCED HEREUNDER: 2.2.1 THROUGH THE NOTICE/S U/S 143(2) DATED 12.08.2 017 (PB 4-8), THERETO CALLED FOR EXPLANATION AS UNDER: FOLLOWING ISSUE(S) HAVE BEEN IDENTIFIED FOR EXAMIN ATION: I. WHETHER THE FUNDS RECEIVED IN THE FORM OF SHARE PRE MIUM ARE FROM DISCLOSED SOURCES AND HAVE BEEN CORRECTLY OFFERED F OR TAX. ITA 09/JP/2021_ ANNU AGROTECH P LTD. VS PR.CIT 10 IN VIEW OF THE ABOVE, I WOULD LIKE TO GIVE YOU AN O PPORTUNITY TO PRODUCE ANY EVIDENCE/INFORMATION WHICH YOU FEEL IS NECESSAR Y IN SUPPORT OF THE SAID RETURN OF INCOME ON OR BEFORE 29/08/2017 AT 11 :30 AM. REPLY TO THE ABOVE NOTICE WAS SUBMITTED ON 29.08.20 17 (PB 8) AS UNDER: WITH REFERENCE TO THE ABOVE SUBJECT IT IS SUBMITTE D THAT THE SHARES HAVE BEEN ISSUED IN THE FORM OF SHARE PREMIUM FROM DISCL OSED SOURCES . IT IS SUBMITTED THAT THE NET WORTH OF THE COMPANY AS ON 3 1.03.2015 IS RS. 55,47,060/- AND ESTIMATED PROFIT UPTO THE DATE OF I SSUE OF SHARES WAS RS. 62,940/-, HENCE TOTAL NET WORTH OF THE COMPANY DEEM ED IS RS. 56,10,000/-.TOTAL 93,500 SHARES HAVE BEEN ISSUED. B OOK VALUE OF THE SHARE WAS RS. 60/- AND THE COMPANY HAS ISSUED RIGHT S ISSUE AS PER BOOK VALUE OF THE COMPANY. 10 RUPEES FACE VALUE SHARES HAS BEEN ISSUED AT THE PREMIUM OF RS. 50/- I.E. @ RS. 60/- PER SHARE, HENCE AS PER BOOK VALUE THE RIGHTS ISSUE HAS BEEN ALLOTTED. WE WANT A PERSONAL HEARING THE CASE AND DO NOT WANT E-PROCEEDING FACILITY THROUGH OUR ACCOUNT IN E-FILING WEBSITE OF THE INCOME TAX DEPARTMENT. WE OPTED OUT E-ASSESSMENT PROCEEDINGS. 2.2.2 THEREAFTER, IN NOTICE U/S 142(1) DATED 25.06. 2018 (PB 9-11) THE AO RAISED MORE QUERIES ON THE ISSUE IN HAND: 3. TO FURNISH COPY OF DIRECTORS AND AUDITORS REP ORT WITH FINANCIAL STATEMENTS AS ON 31.03.2014, 31.03.2015 & 31.03.201 6. 4. TO FURNISH COMPLETE DETAIL OF BANK ACCOUNTS & PO ST OFFICE ACCOUNTS AND OTHER FINANCIAL INSTITUTION ACCOUNTS MANAGED/OPERAT ED IN THE TABLE GIVEN BELOW 5. TO EXPLAIN WITH SUPPORTING DOCUMENTS THAT WHETHE R THE FUNDS RECEIVED IN THE FORM OF SHARE PREMIUM ARE FROM DISCLOSED SOU RCES AND HAVE BEEN CORRECTLY OFFERED FOR TAX. THE SAME WAS REPLIED VIDE LETTER DATED 08.08.2018 ( PB 11) 3. COPIES OF THE DIRECTORS REPORT AND AUDITORS REPORT FOR THE FY ENDED ON 31.03.2014, 31.03.2015 & 31.03.2016 ARE ENCLOSED. ITA 09/JP/2021_ ANNU AGROTECH P LTD. VS PR.CIT 11 4. DETAILS OF BANK ACCOUNT ARE ENCLOSED IN THE FOR MAT PROVIDED BY YOU. 5. IN RESPECT OF POINT NO. 5: IT IS SUBMITTED THAT THE SHARES HAVE BEEN ISSUED IN THE FORM OF SHARE PREMIUM FROM DISCLOSED SOURCES . 2.2.3 THE AO AGAIN ISSUED A NOTICE U/S 142(1) DATED 09.09.2018 (PB 12- 13) CALLING FOR EXPLANATION, DIRECTLY ON THE ISSUES IN HAND, AS UNDER: PARTICULARS OF ACCOUNTS AND/OR DOCUMENTS REQUIRED. 1. TO EXPLAIN WITH SUPPORTING DOCUMENTS THAT WHETHE R THE FUNDS RECEIVED IN THE FORM OF SHARE PREMIUM ARE FROM DISCLOSED SOU RCES AND HAVE BEEN CORRECTLY OFFERED FOR TAX. 2. TO PROVE THE GENUINENESS TO TRANSACTIONS WITH PR OVING THE IDENTITY OF PERSONS AND EXPLAIN THEIR CREDITWORTHINESS REGARDIN G RECEIPTS OF SHARE CAPITAL AND SHARE PREMIUM. 3. TO EXPLAIN AND JUSTIFY WITH SUPPORTING DOCUMENTS THAT WHETHER THE PROVISIONS OF SECTION 56(2)(VIIB) OF THE INCOME-TAX ACT, 1961 READ WITH RULE 11UA(2) OF THE INCOME-TAX RULES, 1962 ARE NOT APPLICABLE ON RECEIPTS OF SHARE PREMIUM. 4. ON PERUSAL OF YOUR SUBMISSIONS AND DOCUMENTS, IT IS NOTICED THAT FMV OF UNQUOTED SHARES WHICH ALLOTTED DURING THE YEAR U NDER CONSIDERATION IS COME AT RS.57.67 AGAINST CALCULATING BY YOU OF RS.6 0 IN TERMS OF PROCEDURE PROVIDED UNDER RULE 11UA(2) OF THE INCOME -TAX RULES, 1962 I.E., A-L/PE*PV = (7231418-733000)- (64254+1111000+491891)/935000*10. THUS, THERE IS A DIFFERENCE COMES OF RS.14,99,400 IS WHY NOT TO BE ADDED TO YOUR TOTA L TAXABLE INCOME IN TERMS OF SECTION 56(2)(VIIB) OF THE INCOME-TAX ACT, 1961. THE SAME WAS DULY REPLIED VIDE LETTER DATED NIL A ND DATED 12.11.2018 (PB 14-19), ON ALL THE QUERIES RAISED. THE ASSESEE PROVIDED COMPLETE NAME AND PAN NO OF ALL THE THREE SHAREHOLDERS. TO P ROVE THEIR GENUINENESS, THE ASSESEE ALSO SUBMITTED COPIES OF I TR ACKNOWLEDGEMENTS (PB 29-40) AND THE CONFIRMATIONS DULY SIGNED BY THE M (PB 43-45), TO WHOM THE SHARES WERE ALLOTTED. THE ASSESEE ALSO SUB MITTED JUSTIFICATION BEHIND THE PREMIUM @ RS 50/- PER SHARE CHARGED AS U NDER: ITA 09/JP/2021_ ANNU AGROTECH P LTD. VS PR.CIT 12 1 THAT WE HAVE ALLOTTED THE SHARES ON PREMIUM AS P ER FOLLOWING CALCULATION: NET ASSETS VALUE AS ON 31.03.2015 : 72,31,418.00 LESS: LIABILITIES : 4,91,891.00 : 11,73,787.00 16,65,678.00 5565740/ 93500 = 59.53 AS ON 31.03.2015 AND AS PER FAIR MARKET VALUE WHICH IS RS. 60/- PER SHARE. X X X X AS PER CALCULATION WE HAVE TAKEN THE PREMIUM AS PER VALUE OF THE SHARES I.E. FACE VALUE IS RS. 10 PER SHARE AND PREMIUM OF RS. 50/- PER SHARE HENCE TOTAL VALUE IS RS. 60/- PER SHARE AND THERE I S NO TAX LIABILITY ON SHARE PREMIUM AS THEY ARE FROM DISCLOSED SOURCES. THE ASSESSE ALSO SUBMITTED THE COPY OF BANK STATEME NTS OF THE ASSESSE COMPANY (PB 24-28). 2.3 THE LD. AR ATTENDED TIME TO TIME, PRODUCED BOOK S OF ACCOUNT INCLUDING CASH BOOK, LEDGER, SUBSIDIARY RECORDS AND FILED VARIOUS OTHER DETAILS AS REQUIRED, STATED ABOVE AND ALSO THOSE EV EN THOUGH NOT REQUIRED, WHICH WERE DULY EXAMINED. THE AO MADE ALL THE INQUIRIES, SOUGHT CLARIFICATION S ON ALL THE RELEVANT ASPECTS TO THE EXTENT HE WAS SUPPOSED LOOKING TO TH E NATURE OF THE ISSUE INVOLVED, THE PAST ACCEPTED HISTORY OF THE CASE AND THE EVIDENCES AND MATERIAL ALREADY AVAILABLE THEREIN TOGETHER WITH TH E MATERIAL PROVIDED DURING THE ASSESSMENT PROCEEDINGS. THUS, LD. AO FRA MED THE ASSESSMENT IN ACCORDANCE WITH THE AVAILABLE JUDICIAL GUIDELINE . IT IS ALSO A FACT ON RECORD THAT THE ASSESSE OPTED FOR PERSONAL HEARING AND DENIED FOR E-PROCEEDINGS. AGAIN AN ADMITTED FACT IS THAT THE DIRECTOR- SHAREHOLDER DHARAM CHAND JAIN, FCA HIMSELF ATTENDED ON VARIOUS OCCASIONS ALONG WITH THE AR CA SUMIT CHITTORA ON AS MANY AS NINE DATES MENTIONED ON THE FIRST PAGE OF THE SUBJECTED ASSESS MENT ORDER. NEEDLESS TO SAY THAT, DURING THE COURSE OF PERSONAL HEARING, THERE IS ALWAYS AN EXCHANGE OF ORAL INFORMATION BY WAY OF DISCUSSION. THE AO ONCE HAVE BEEN RAISED REGULAR QUERIES DISCUSSED THE ISSUES OF IDENTITY AND CREDITWORTHINESS OF THE SHAREHOLDERS AND THE GENUIN ENESS OF THE ITA 09/JP/2021_ ANNU AGROTECH P LTD. VS PR.CIT 13 TRANSACTION AND THE AR EXPLAINED HIM, IN A GREAT DE TAIL W.R.T FINANCIAL CAPACITY OF THE THREE SHAREHOLDERS. IT CANNOT BE PR ESUMED THAT A QUASI- JUDICIAL AUTHORITY HAVING RAISED THE RELEVANT QUERI ES WOULD NOT HAVE ASKED ANYTHING FROM THE AR DURING THE COURSE OF THE PERSO NAL HEARING AND REMAINED A SILENT SPECTATOR. MORE PARTICULARLY, WHE N ALL THE SHAREHOLDERS WERE REGULAR IT ASSESSES WITH PAN NO. AND AFTER DIS CUSSION WITH THEM, HE WAS HAVING THE AUTHORITY AND A TECHNICAL INFRASTRUC TURE TO LOOK INTO THE ASSESSMENT RECORD OF THIS YEAR AS WELL AS THE PRECE DING YEAR ALONG WITH THE ENCLOSURES FILED WITH OR WITHIN THE ROI BY THE CONCERNED SHAREHOLDER. THUS, UNLESS THERE WAS SOMETHING NEGATIVE AVAILABLE ON RECORD OR SO ALLEGED BY THE LD. CIT, HIS ATTEMPT TO FIND FAULT I N THE ACTIONS OF THE AO, IS NOT LEGALLY JUSTIFIED. 3. SOURCE OF RECEIPT OF SHARE PREMIUM AMOUNT: 3.1 AO ACTED AS PER JUDICIAL GUIDELINES: THIS ALL THE MORE HOLDS GOOD WHEN BINDING DECISIONS OF THE HONBLE JURISDICTIONAL HIGH COURT IN VARIOUS CASES (INFRA) HAVE PROPOUNDED THE PRINCIPLE IN THE CONTEXT OF S.68 BEING ONLY THE EXA MINATION OF THE IDENTITY OF THE SHAREHOLDER CONCERNED HIS/HER THE CONFIRMATI ON OF THE FACT OF PROVIDING/ TRANSFERRING SUBJECTED AMOUNT TO THE ASS ESSE BUT THE AO IS NOT LEGALLY BOUND TO EXAMINE SOURCE OF SOURCE, ONCE THE IMMEDIATE SOURCE IS AVAILABLE. IN THE PRESENT CASE, THE AO WAS HAVING COMPLETE DET AILS OF THE IDENTITY IN THE SHAPE OF PAN NUMBER & ADDRESS (PB 29-40). HE WA S ALSO HAVING CONFORMATION (PB 43-45) DULY SIGNED BY THE SHAREHOL DER. AS STATED, HE WAS ABLE AND HE LOOKED INTO THE FILE OF THE SHAREHO LDERS IN THE PORTAL OF THE DEPARTMENT. THUS, IN VIEW OF THE BINDING JUDICI AL GUIDELINE, THE AO WAS NOT OBLIGED STILL TO ASK THE ASSESSEE TO PROVID E SOURCE OF SOURCE UNDER THE PRETENSE OF EXAMINATION OF THE CREDITWORTHINESS OF THE SHAREHOLDER. 3.2 FOLLOWING DECISIONS OF HONBLE RAJASTHAN HIGH C OURT ARE DIRECTLY RELEVANT FOR THE PURPOSE. 3.2.1 KINDLY REFER LABHCHAND BOHRA V/S ITO (2008) 8 DTR 44 (RAJ.) (DPB 1-4) HELD THAT CASH CREDIT- BURDEN OF PROOF- IDENTITY OF THE CRED ITORS ESTABLISHED AND THE CONFIRMED THE CREDIT. THIS DISCHARGED THE BURDE N OF APPELLANT TO ITA 09/JP/2021_ ANNU AGROTECH P LTD. VS PR.CIT 14 PROVE GENUINENESS. HOWEVER, CAPACITY OF THE LENDER TO ADVANCEMENT MONEY TO APPELLANT WAS NOT A MATTER WHICH THE APPEL LANT COULD BE REQUIRED TO ESTABLISH AND THAT WOULD AMOUNT TO CALL ING UPON HIM TO ESTABLISH THE SOURCE OF SOURCE. HENCE ADDITION CANN OT BE SUSTAINED. 3.2.2 IN ARAVALI TRADING CO. V/S ITO (2008) 8 DTR 1 99 (RAJ) (DPB 5-9) HELD THAT: ONCE THE EXISTENCE OF THE CREDITORS IS PROVED AND SUCH PERSONS OWN THE CREDITS WHICH ARE FOUND IN THE BOOKS OF THE APPELLA NT, THE APPELLANTS ONUS STAND DISCHARGED AND THE LATTER IS NOT FURTHER REQU IRED TO PROVE THE SOURCES FROM WHICH THE CREDITORS COULD HAVE ACQUIRE D THE MONEY DEPOSITED WITH HIM AND, THEREFORE THE ADDITION U/S 68 CANNOT BE SUSTAINED IN THE ABSENCE OF ANYTHING TO ESTABLISH T HAT THE SOURCES OF THE CREDITORS DEPOSITS FLEW FROM THE APPELLANT ITSELF. 3.2.3 IN CIT V. G. M. MITTAL STAINLESS STEEL (P.) L TD. [2003] 263 ITR 255 (SC) PRECEDENTBINDING NATURE OF JUDGMENTDECISION OF T HE JURISDICTIONAL HIGH COURTWHERE THE DECISION OF THE JURISDICTIONAL HIGH COURT HAS NOT BEEN SET ASIDE OR AT LEAST HAS NOT BEEN APPENDED FR OM IT WOULD BE BINDINGIN VIEW OF THIS CIT PROCEEDING ON THE BASIS OF THE HIGH COURT OTHER THAN JURISDICTIONAL HIGH COURT ON THE BASIS T HAT JURISDICTIONAL HIGH COURT WAS ERRONEOUS AND THAT THE AO WHO HAD ACTED I N TERMS OF THE HIGH COURTS DECISION HAD ACTED ERRONEOUSLY, WAS NOT JUS TIFIED 4.1 ACCORDINGLY, IT IS SUBMITTED THAT AO RAISED VER Y SPECIFIC AND DIRECTLY RELEVANT QUERIES/CALLED FOR EXPLANATION AND EVIDENC ES W.R.T. SOURCE OF AMOUNT RECEIVED BY THE COMPANY FROM THREE SHAREHOLD ERS (AS INDICATED IN THE TABLE HERE IN ABOVE), MEANS TO THE EXTENT HE WA S SUPPOSED TO ACT IN LAW AND IN ACCORDANCE WITH THE ABOVE DECISIONS. 4.2 AS APPARENT FROM THE RECORD, IT IS VERY CLEAR T HAT THE ASSESSEE HAD DISCHARGED THE BURDEN, BY SATISFYING ALL THE THREE CONDITIONS, AS UNDER: 4.2.1 IDENTITY ESTABLISHED: THE FACTS ARE NOT DENIE D THAT THE ASSESSE HAD ALREADY SUBMITTED COMPLETE ADDRESSES OF ALL THE THR EE SHAREHOLDERS AS ITA 09/JP/2021_ ANNU AGROTECH P LTD. VS PR.CIT 15 ALSO THEIR PERMANENT ACCOUNT NUMBER (PAN) WHICH IS THE BEST EVIDENCE TO PROVE THE IDENTITY OF A SHAREHOLDER, IN THE RECORDS OF AO ITSELF. MOREOVER, ALL THE TRANSACTIONS WITH ALL THE SHAREHOLDERS WERE ADMITTEDLY MADE THROUGH BANKING CHANNELS ONLY. THUS, THEIR IDENTITY IS FULLY ESTABLISHED. 4.2.2 GENUINE TRANSACTIONS: THE GENUINENESS OF THE TRANSACTION IS FULLY ESTABLISHED IN AS MUCH AS ALL THE BORROWINGS WERE M ADE THROUGH ACCOUNT PAYEE CHEQUE ONLY AND THE SAME WAS DULY VERIFIED BY THE AO FROM THE BANK STATEMENT (PB 24-28) OF THE ASSESSE COMPANY FI LED BEFORE HIM, WHEREIN THE FACT AND THE RECEIPT OF THE SUBJECTED A MOUNT TOWARDS THE ALLOTMENT OF SHARE, WAS CLEARLY VISIBLE AND WAS DUL Y VERIFIED BY THE AO. APART FROM THE BANK STATEMENT, THE AO WAS ALSO HAVI NG THE LEDGER ACCOUNTS OF THE BANK IN THE ACCOUNT BOOKS MAINTAINE D BY THE ASSESSE AND PRODUCED BEFORE HIM AS ALSO THROUGH THE CONFIRMATIO N OF ALL THE THREE SHAREHOLDERS (PB 43-45) CONTAINING COMPLETE DETAILS I.E. THE AMOUNT, DATE, CHEQUE NUMBER ETC. IT IS NOT THE CASE OF THE REVENUE THAT THE BORROWING WAS MADE IN CASH SO AS TO JUSTIFY ANY SUS PICION. THERE WAS NO CASH DEPOSIT MADE IN THEIR BANK A/C JUST PRIOR TO I SSUE OF CHEQUE TO THE ASSESSEE COMPANY. FOR THE COMPLETENESS, THE DETAILS OF THE AMOUNT RECEIVED FROM THE SHAREHOLDERS IS AS UNDER: SMT. CHELNA DEVI JAIN, PAN AGTPJ3772H: S.NO. NAME OF SHARE-HOLDER NO. OF SHARES ISSUED DURING THE YEAR AMOUNT OF TOTAL SHARES 1 SMT. CHELNA DEVI JAIN 63,475 38,08,500 THE PAYMENT RECEIVED BY THE COMPANY IN ITS BANK ACC OUNT MAINTAINED WITH SBBJ HAVING NO 61264902049 ON DATED AS UNDER: DATE AMOUNT IN RS. 18.12.2015 16,92,000 28.01.2016 21,16,500 TOTAL 38,08,500 SHRI MANOHAR LAL JAIN, PAN ATZPS8153L S.NO. NAME OF SHARE-HOLDER NO. OF SHARES ISSUED DURING THE YEAR AMOUNT OF TOTAL SHARES 2 SHRI MANOHAR LAL JAIN 28,900 17,34,000 ITA 09/JP/2021_ ANNU AGROTECH P LTD. VS PR.CIT 16 THE PAYMENT RECEIVED BY THE COMPANY IN ITS BANK ACC OUNT MAINTAINED WITH SBBJ HAVING NO 61264902049 ON DATED AS UNDER: DATE AMOUNT IN RS. 18.12.2015 7,71,000 28.01.2016 9,63,000 TOTAL 17,34,000 SHRI DHARM CHAND JAIN, PAN ABRPJ4861E S.NO. NAME OF SHARE-HOLDER NO. OF SHARES ISSUED DURING THE YEAR AMOUNT OF TOTAL SHARES 3 SHRI DHARM CHAND JAIN 87,625 52,57,500 THE PAYMENT RECEIVED BY THE COMPANY IN ITS BANK ACC OUNT MAINTAINED WITH SBBJ HAVING NO 61264902049 ON DATED AS UNDER: DATE AMOUNT IN RS. 18.12.2015 23,37,000 28.01.2016 29,20,500 TOTAL 52,57,500 4.2.3 CAPACITY PROVED: FURTHER THE CREDITWORTHINESS OF THE SHAREHOLDERS ALSO STANDS FULLY ESTABLISHED IN AS MUCH AS THE DIR ECT SOURCE OF THE AMOUNTS GIVEN WAS THE INCOME DECLARED YEAR TO YEAR BY THE RESPECTIVE SHAREHOLDERS IN THEIR RETURN OF INCOME (ACCUMULATED SAVINGS) AND LOAN TAKEN FROM OUTSIDER BUT FINALLY DEPOSITED IN THE RE SPECTIVE BANK ACCOUNTS BY THE SHAREHOLDERS. THE ASSESSEE NOT ONLY SUBMITTE D THEIR PAN NO. BUT ALSO PROVIDED COPIES OF ACKNOWLEDGEMENT OF FILING R ETURN OF INCOME WHICH CONTAINS THE COMPUTATION OF TOTAL INCOME. THE AO DIRECTLY INQUIRED DEEPER INTO THE ASSESSMENT RECORD OF THE CONCERNED SHAREHOLDER ON THE PORTAL OF INCOME TAX D EPARTMENT WITH REFERENCE TO THE RESPECTIVE PAN NO. GIVEN BY THE AS SESSEE. NEEDLESS TO SAY THAT THE ENTIRE INFORMATION OF THAT PARTICULAR SHAREHOLDER BEING THE BALANCE SHEET, DETAILS OF INCOME DECLARED, SUBJECTE D TRANSACTIONS DONE WITH THE ASSESSE COMPANY IN THE CURRENT YEAR AS ALS O HIS CREDITWORTHINESS/ FINANCIAL CAPACITY WAS DULY VERIFIED BY THE AO. ORA L EXPLANATION WERE ALSO MADE DURING THE PERSONAL HEARING. THE LD CIT, IN FA CT, DID NOT APPLY HIS ITA 09/JP/2021_ ANNU AGROTECH P LTD. VS PR.CIT 17 MIND ON THIS ASPECT AND IGNORED THAT THE AO WAS EMP OWERED LEGALLY AND TECHNICALLY TO HAVE EXAMINED THE VERACITY OF THE CL AIM MADE BY THE ASSESSE WITH REGARD TO THE CREDITWORTHINESS OF THE SHAREHOLDERS. 4.2.4 THE FOLLOWING FACTS AND DETAILS WHICH WERE AV AILABLE ON THE PORTAL OF THE INCOME TAX DEPARTMENT AND EMANATED FROM THE HEA RING, WERE KNOWN TO THE AO, ARE QUITE RELEVANT AND BEING SUBMITTED H EREUNDER: CHELNA DEVI: SHE IS AN OLD AND REGULAR INCOME TAX A SSESSE. THIS FACT CAN BE VERIFIED FROM THE PAN CARD DATA. THE RETURN OF I NCOME FOR THIS YEAR WAS FILED ON GROSS TOTAL INCOME OF RS 12,23,031/- A ND TOTAL INCOME OF RS. 10,72,700/- FOR A.Y. 2016-17. SHE IS PROPRIETOR OF M/S MUNMUN INDUSTRIES. THE BALANCE SHEET OF THE PROPRIETARY WA S UPLOADED IN THE ROI FILED BY HER. THE SOURCE OF FUND TRANSFERS TO THE A SSESSE COMPANY WAS FROM HER PROPRIETARY M/S MUNMUN INDUSTRIES WHICH IS A TAX AUDIT CASE WITH A TURNOVER OF RS. 3523.81 LAKHS. THE CLOSING B ALANCE OF HER CAPITAL A/C IN THE PROPRIETARY STOOD AT RS. 97.08 LAKHS AND HER TOTAL CAPITAL STOOD AT RS. 148.18 LAKHS. HER FINANCIAL CAPACITY WAS DUL Y VERIFIED BY THE AO. THERE IS NOTHING ON RECORD TO ARISE ANY SUSPICION O F THE AO NOR THE LD. CIT POINTED OUT ANY ADVERSE MATERIAL THOUGH AVAILAB LE ON THE ASSESSMENT RECORD BUT IGNORED BY THE AO WARRANTING FURTHER INV ESTIGATION WITH REGARD TO ALL THE THREE ASPECTS RELEVANT FOR S.68. INCOME DETAILS OF SMT. CHELNA DEVI (PAN: AGTPJ3772H ) HEAD ASSESSMENT YEAR 2016-17 2015-16 2014-15 2013-14 2012-13 GROSS TOTAL INCOME 12,23,031 11,75,948 10,57,444 6,09,139 5,48, 768 MANOHAR LAL JAIN: HE IS ALSO AN OLD AND REGULAR INC OME TAX ASSESEE. THIS FACT CAN BE VERIFIED FROM THE PAN CARD DATA. THE RO I WAS FILED SHOWING GROSS TOTAL INCOME OF RS. 6,74,581/- AND TOTAL INCO ME OF RS. 5,23,430/- FOR A.Y. 2016-17. HE ALSO DECLARED AGRICULTURAL INC OME OF RS.1,50,000/-. HE IS ALSO RUNNING A PROPRIETARY IN THE NAME OF THE M/S OM TRACTOR AGENCIES SINCE 2008. HE HAS BEEN REGULARLY SHOWING SUBSTANTIAL AGRICULTURAL INCOME IN THE PAST, THIS CAPITAL WAS O F 1.19 CR. A LOOK ON THE INCOME DECLARED IN THE PRECEDING FOUR YEARS WILL SHOW THAT DECLARED INCOME RANGING BETWEEN RS. 7,00,000/- TO M ORE THAN RS. ITA 09/JP/2021_ ANNU AGROTECH P LTD. VS PR.CIT 18 9,00,000/- AND AGRICULTURAL INCOME RANGING FROM RS. 1,11,000/- TO RS. 1,30,000/-, AS UNDER: INCOME DETAILS OF SH. MANOHAR LAL SHAH (PAN: ATZPS8 153L) HEAD ASSESSMENT YEAR 2016-17 2015-16 2014-15 2013-14 2012-13 RENTAL INCOME 3,60,000 3,60,000 2,82,000 2,98,000 2 ,62,000 BUSINESS INCOME 4,21,431 3,12,490 3,07,004 5,49,068 3,87,154 INTEREST INCOME 1,150 1,099 4,546 2,968 2,460 AGRICULTURE INCOME 1,50,000 1,30,000 1,25,600 1,11,000 1,11,000 TOTAL 9,32,581 8,03,589 7,19,150 9,61,036 7,62,614 DHARAM CHAND JAIN: HE IS ALSO AN OLD AND REGULAR IN COME TAX ASSESSE AND PRACTICING CHARTERED ACCOUNTANT SINCE LONG. THIS FA CT CAN BE VERIFIED FROM THE PAN CARD DATA. THE ROI WAS FILED SHOWING GROSS TOTAL INCOME OF RS. 6,79,099/- AND TOTAL INCOME OF RS. 5,26,550/- FOR A .Y. 2016-17. HE HIMSELF APPEARED BEFORE AO , CONFIRMED EXPLAINED BA NK TRANSACTIONS AND CREDIT WORTHINESS , HIS CAPITAL WAS OF RS 83.57 LAC KS AND HE HAD UNSECURED LOANS OF RS 95 LAKHS. HE HIMSELF APPEARED BEFORE AO, CONFIRMED, EXPLAINED BANK TRANSACTION AND CREDIT WO RTHINESS. A LOOK ON THE INCOME DECLARED IN THE PRECEDING FOU R YEARS WILL SHOW THAT DECLARED INCOME RANGING BETWEEN RS 4.88LAKHS TO RS 7.76 LAKHS. INCOME DETAILS OF SH. DHARM CHAND JAIN (PAN: ABRPJ4 861E) HEAD ASSESSMENT YEAR 2016-17 2015-16 2014-15 2013-14 2012-13 GROSS TOTAL INCOME 6,79,099 6,43,430 5,48,703 6,04,222 4,22,501 PROFIT FROM FIRM (EXEMPT INCOME) 96,956 29,204 60,959 71,242 65,550 TOTAL 7,76,055 6,72,634 6,09,662 6,75,464 4,88,051 ITA 09/JP/2021_ ANNU AGROTECH P LTD. VS PR.CIT 19 THEREFORE, THE ALLEGATION AND THE EXPECTATION OF TH E LD. CIT FROM THE AO ACTING AS QUASI-JUDICIAL AUTHORITY, EXAMINE THE REC EIPTS IN CONTEXT WITH THE S. 68 AND REQUIRING HE ASSESSE TO PROVE THE CREDIT TO THE HILT, IS CLEARLY BEYOND THE SCOPE OF S. 263, IN AS MUCH AS HE WAS SU PPOSED, ONLY TO THE EXTENT OF EXAMINATION OF THE FACT THAT THE AMOUNT S O RECEIVED TOWARDS THE SHARE PREMIUM WAS NOT FROM UNDISCLOSED SOURCES (IF ONE STRICTLY GO BY THE REASON OF SELECTION FOR LIMITED SCRUTINY) OR TO EXA MINE THE CONDITIONS AS PER RHC DECISIONS. THUS, WHEN AO HAS ACTED ACCORDING TO THE JUDICIAL G UIDELINE AND THE PRINCIPLES PROPOUNDED BY THE HONBLE RAJASTHAN HIGH COURT THE AO COULD NOT VENTURE TO FOLLOW THE BINDING DECISIONS. IF THE LD. CIT HAD ANY DOUBT, HE SHOULD HAVE DIRECTED INQUIRY IN THEIR HANDS AS H ELD IN LOVELY EXPORTS [2015] 59 TAXMANN.COM 232 (MUMBAI - TRIB.). HENCE, IT CANNOT BE SAID THAT THE IMPUGNED ASSESSME NT ORDER WAS ERRONEOUS AND THEREFORE PREJUDICIAL TO THE INTEREST OF THE REVENUE, FOR WANT OF FURTHER ENQUIRY BY THE AO. 4.3 WE ALSO RELY UPON W/S PG- 2-5 (PB 65-68) MADE T O THE CIT. 5. CREDIT SELF-EXPLANATORY: FURTHER THE UNDISPUTED FACTS ARE THAT ALL THE THREE SHAREHOLDERS WERE ALLOTTED EQUITY SHARES AS P ER THE DETAILS GIVEN AT PG 2 OF THE IMPUGNED ORDER IN CONSIDERATION OF RS. 60 PER SHARE. NECESSARY FORMALITY OF FILING RETURN OF ALLOTMENT A ND MAKING ENTRIES IN THE RECORD WERE COMPLETED AS PER THE PROVISIONS OF THE COMPANIES ACT, 2013. THUS, THE SUBJECTED RECEIPTS OF RS. 1.08 CR FROM TH E THREE SHAREHOLDERS WAS IN CONSIDERATION OF THE 1.80 LAKHS EQUITY SHARE S. SUCH CREDITS, WERE NOT LOAN/ BORROWINGS TO BE TERMED AS CASH CREDITS U /S 68. THE LAW IS WELL SETTLED AND MORE PARTICULARLY, BY THE DECISION OF T HE HONBLE RAJASTHAN HIGH COURT THAT RECEIPT OF THE CONSIDERATION IN THE EXCHANGE OF THE MOVABLE/ IMMOVABLE PROPERTY OR ANYTHING, IS A CASE OF SELF-EXPLANATORY CREDIT, HENCE U/S 68 SHOULD NOT BE APPLIED. KINDLY REFER SMT. HARSHILA CHORDIYA VS. ITO (2008) 298 ITR 349 (RAJ) WHEREIN IT WAS HELD THE TRIBUNAL HAS FOUND AS A FAC T THAT THE ASSESSEE WAS RECEIVING MONEY FROM THE CUSTOMERS AGAINST WHIC H DELIVERY OF VEHICLES WAS MADE SUCH CASH DEPOSITS ARE SELF E XPLANATORY AND WOULD NOT ATTRACT S. 68 THEREFORE, NO ADDITION COULD BE MADE. ITA 09/JP/2021_ ANNU AGROTECH P LTD. VS PR.CIT 20 THE LD. CIT HAS NOT DOUBTED THE OWNERSHIP OF THE RE SPECTIVE SHAREHOLDINGS BY THE THREE SHAREHOLDERS AND ALSO MU ST HAVE BEEN CONSIDERED BY THE RESPECTIVE AO/S. THEREFORE, IT CA NNOT BE DOUBTED THAT THIS WAS UNDISCLOSED INCOME OF THE ASSESSE COMPANY WHICH MIGHT HAVE BEEN INTRODUCED THROUGH BOGUS CREDITS SO THAT THE A O MUST HAVE MADE ENQUIRIES TO PROVE OTHERWISE OF WHAT WAS APPARENT O N THE FACE. THEREFORE, THE LEVEL OF THE PROOF REQUIRED IN A NOR MAL CASE OF CASH CREDIT U/S 68 COULD NOT HAVE BEEN BLINDLY APPLIED AND EXPE CTED OF THE AO TO HAVE THE SAME DEGREE OF PROOF IN THE PECULIAR FACTS OF THIS CASE (THOUGH ASSESSE DID FURNISH THE REQUISITE DETAILS AND THE E VIDENCES) AND THE AO ALSO DID WHATEVER IT WAS SUPPOSED IN THE LAW TO SAT ISFY THE REQUIREMENT OF S.68. NO DOUBT, A PROVISO WAS INSERTED WHICH, REQUIRES TH E AO THAT THE EXPLANATION OFFERED BY THE ASSESSE COMPANY FOR THE AMOUNT CREDITED TOWARDS SHARE APPLICATION MONEY, PREMIUM ETC. SHALL BE DEEMED NOT SATISFACTORY UNLESS THE SHAREHOLDER DOES NOT OFFER EXPLANATION ON THE NATURE AND THE SOURCE OF THE SUM CREDITED AND SUCH EXPLANATION IN THE OPINION OF THE AO IS NOT FOUND SATISFACTORY. IN THE PECULIAR FACTS OF THIS CASE, THE AO WAS NOT SUPPOSED TO DEEM THE EXPLANATI ON OFFERED BY THE ASSESSE AS UNSATISFACTORY BECAUSE THE ASSESSE HAD E XPLAINED THE NATURE AND THE SOURCE TO THE SATISFACTION OF THE AO AND TH ERE WAS NO EVIDENCE, INFORMATION OR ANYTHING ELSE INDICATING THAT MORE E NQUIRY WAS WARRANTED. HENCE, THE PRINCIPLE PROPOUNDED BY THE HONBLE RAJA STHAN HIGH COURT IN THE CASE OF SMT. HARSHILA CHORDIYA (SUPRA) STILL HO LDS GOODS IN AS MUCH AS THE PROVISO BROADLY STATES WHAT S. 68 STATES. IN FA CT, FIRST PROVISO WAS INSERTED TO ANNUL THE ARGUMENT THAT RECEIPTS TOWARD S SHARE ALLOTMENT, PREMIUM ETC. ARE AS OF CAPITAL NATURE TO AVOID THE APPLICATION OF S. 68 W.R.T SUCH RECEIPTS. THEREFORE, THE RATIO LAID AS A BOVE HELD GOOD IN PRESENT CASE ALSO AND THIS LAW OF LAND HAVING BEEN AVAILABL E ON THE DATE OF THE PASSING OF THE ASSESSMENT ORDER DATED 16.11.2018, C OULD NOT HAVE BEEN IGNORED BY THE AO. 6.1 IT IS NOT THE CASE OF CIT THAT THERE WAS A COMP LETE/TOTAL LACK OF INQUIRY. HE HIMSELF ADMITS IN THE IMPUGNED ORDER TH AT THE AO DID MAKE ENQUIRY ON BOTH THE ISSUES. THE LAW IS WELL SETTLED THAT THE ASSESSMENT ORDER CANNOT BE HELD TO BE ERRONEOUS SIMPLY ON THE ALLEGATION OF INADEQUATE ENQUIRY. UNLESS THERE IS AN ESTABLISHED CASE OF TOTAL LACK OF ITA 09/JP/2021_ ANNU AGROTECH P LTD. VS PR.CIT 21 ENQUIRY. KINDLY REFER CIT VS. SUNBEAM AUTO LTD. (2011) 332 ITR 167 (DEL) (DPB 10-20) , WHEREIN DELHI HIGH COURT WAS CONSIDERING THE ASPE CT, WHEN THERE IS NO PROPER OR FULL VERIFICATION, AND IT WAS HELD THAT: ONE HAS TO SEE FROM THE RECORD AS TO WHETHER THERE WAS APPLICATION OF MIND BEFORE ALLOWING THE EXPENDITURE IN QUESTION AS REVENUE EXPENDITURE. LEARNED COUNSEL FOR THE ASSESSEE IS RIGHT IN HIS SU BMISSION THAT ONE HAS TO KEEP IN MIND THE DISTINCTION BETWEEN LACK OF INQUI RY AND INADEQUATE INQUIRY. IF THERE WAS ANY INQUIRY, EVEN INADEQUATE THAT WOULD NOT BY ITSELF GIVE OCCASION TO THE CIT TO PASS ORDERS UNDE R SECTION 263 OF THE ACT, MERELY BECAUSE HE HAS A DIFFERENT OPINION IN THE MA TTER. IT IS ONLY IN CASES OF LACK OF INQUIRY THAT SUCH A COURSE OF ACTION W OULD BE OPEN. 6.2 IN ANOTHER CASE OF NARAIN SINGLA V. PCIT [2015] 62 TAXMANN.COM 255 (CHANDIGARH - TRIB.) (DPB 21-30) IT WAS HELD THAT W HEN AO WAS FULLY AWARE OF MATTER, HE HAD APPRAISED EVIDENCES FILED B Y ASSESSEE AND THEN HAD FORMED A VIEW TO ACCEPT SAME, COMMISSIONER WAS UNJUSTIFIED IN INVOKING JURISDICTION UNDER SECTION 263. WHETHER IF THERE WAS AN ENQUIRY, EVEN INADEQUATE, THAT WOULD NOT, BY ITSELF, GIVE OC CASION TO COMMISSIONER TO PASS ORDER UNDER SECTION 263, MERELY BECAUSE HE HAS A DIFFERENT OPINION IN MATTER; IT IS ONLY IN CASE OF 'LACK OF I NQUIRY' THAT SUCH A CAUSE OF ACTION CAN BE OPEN. 6.3 IN CIT VS. CHEMSWORTH PVT. LTD. (2020) 275 TAXM AN 408 (KAR) (DPB 31-33), IT WAS HELD THAT: REVISIONERRONEOUS AND PREJUDICIAL ORDERAO TAKING PLAUSIBLE VIEWAO COMPLETED THE ASSESSMENT WITHOUT CONSIDERING EXPEND ITURE WHICH WAS NOT ALLOWABLE UNDER S. 14ACIT HELD THAT NON-CONSIDERAT ION OF DISALLOWABLE EXPENDITURE UNDER S. 14A WAS ERRONEOUS AND IS PREJU DICIAL TO THE INTEREST OF THE REVENUENOT CORRECTCIT HAS HELD HAT THE ENQ UIRY CONDUCTED BY THE AO WAS INADEQUATE AND HAS ASSUMED THE REVISIONA L JURISDICTION ASSESSEE HAS FILED ALL THE DETAILS BEFORE THE AO AN D AO HAS ACCEPTED THE CONTENTION OF THE ASSESSEE THAT NO EXPENDITURE WAS ATTRIBUTABLE TO THE EXEMPT INCOME DURING THE RELEVANT ASSESSMENT YEART HUS, WHILE RECORDING THE SAID FINDING, THE AO HAS TAKEN ONE OF THE PLAUSIBLE VIEWS IN ALLOWING THE CLAIM OF THE ASSESSEETHEREFORE, CIT C OULD NOT HAVE SET ASIDE THE ORDER OF ASSESSMENT MERELY ON THE GROUND OF INADEQUACY OF ENQUIRYORDER PASSED BY THE CIT WAS NOT SUSTAINABLE IN LAW HENCE, THE TRIBUNAL RIGHTLY SET ASIDE THE IMPUGNED ORDER OF TH E CIT. ITA 09/JP/2021_ ANNU AGROTECH P LTD. VS PR.CIT 22 THE LD. CIT IS COMPLETELY SILENT ON THIS ASPECT. 7.1 BEYOND THE SCOPE OF ENQUIRY CONTEMPLATED U/S 26 3: THE SCOPE OF ENQUIRY IN THE PRESENT CASE WAS LIMITED TO THE EXTE NT OF THE ISSUES MADE A BASIS FOR SELECTION OF THE CASE. THE ADMITTED FACT WAS THAT THE CASE WAS SELECTED FOR LIMITED SCRUTINY SO AS TO EXAMINE WHET HER THE FUNDS RECEIVED IN THE FORM OF SHARE PREMIUM ARE FROM DISCLOSED SOU RCES AND HAVE BEEN CORRECTLY OFFERED TO TAX (AND NOT LARGE SHARE PREMI UM RECEIVED DURING THE YEAR VERIFY APPLICABILITY OF SEC 56(2)(VIIB) OR ANY OTHER RELEVANT SECTION) AS PER NOTICE ISSUED U/S 143(2) DATED 12.08.2017 (PB 4 -7). IT IS ALSO A FACT AVAILABLE ON RECORD THAT LIMITED SCRUTINY WAS NOT C ONVERTED TO FULL SCRUTINY NOR THE HIGHER AUTHORITIES DID SO. THUS, THE SCOPE OF EXAMINATION BY THE AO IN THIS LI MITED SCRUTINY WAS CONFINED: A) ONLY TO THE EXAMINATION OF THE FACT AS TO WHETHE R THE FUNDS RECEIVED IN THE FORM OF SHARE PREMIUM WERE FROM DISCLOSED SOURC ES OR NOT. EVIDENTLY, THERE WAS NO POINTED REFERENCE MADE TO S.68 THEREFO RE, THE TECHNICAL REQUIREMENT OF S. 68 BEING ESTABLISHING THE IDENTIT Y AND CREDITWORTHINESS OF THE CREDITOR AND GENUINENESS OF THE TRANSACTION COULD NOT HAVE BEEN PRESUMED BY THE LD. PR. CIT AND CONSEQUENTLY, HE CO ULD NOT HAVE EXPECTED THE AO TO GET THE SAME PROVED BY THE ASSES SE TO THE HILT. IN OTHER WORDS, THIS COULD NOT BE A GOOD BASIS FOR HOL DING THE SUBJECTED ASSESSMENT AS ERRONEOUS AND PREJUDICIAL TO THE INTE REST OF THE REVENUE. IT CANNOT BE DENIED THAT THE VERY REASON OF SELECTION WAS CERTAINLY ENQUIRED INTO BY THE AO IN AS MUCH AS THE FUNDS OF RS. 1.08 CR IN THE FORM OF SHARE PREMIUM WERE FOUND RECEIVED FROM DISCLOSED SOURCES AS THEY WERE RECEIVED FROM THE REGULAR INCOME TAX ASSESSES THROU GH BANKING CHANNELS. THAT BEING THE FACT, THERE WAS NO REASON, TO OFFER SUCH AMOUNT TO TAX. B) THEREAPART, THE REASON FOR SELECTION DOES NOT SP EAK OF S. 56(2)(VIIB) AS WELL. HENCE, HERE ALSO THEREFORE, THE AO COULD NOT HAVE MADE ENQUIRIES ON THIS ASPECT. ALTHOUGH THE AO HAS DULY APPLIED MI ND ON THE ASPECT OF SHARE PREMIUM (AND OTHER RELATED ISSUES ON HIS OWN) BUT THIS FACT ITSELF COULD NOT HAVE AUTHORIZED THE CIT TO HAVE ENLARGED THE SCOPE OF LIMITED SCRUTINY FOR THE PURPOSES OF S. 263. MOREOVER, ONCE COMPLETE DETAILS WERE FILED BEFORE THE CIT, HE WAS SUPPOSED TO ADJUDICATE D THE ISSUES ON MERITS INSTEAD OF SENDING IT BACK TO THE AO. THE OBSERVATI ON AND ALLEGATION OF THE LD. CIT APPEARS TO BE FACTUALLY INCORRECT. ON T HE FIRST PAGE OF THE IMPUGNED ORDER ALSO, HE WRONGLY NARRATED THE BASIS OF THE SELECTION OF ITA 09/JP/2021_ ANNU AGROTECH P LTD. VS PR.CIT 23 THE CASE UNDER CASS UNDER LIMITED SCRUTINY FOR THE REASON LARGE SHARE PREMIUM RECEIVED DURING THE YEAR (VERIFY APPLICABIL ITY OF S. 56(2)(VIIB) OR ANY OTHER RELEVANT SECTION. IT HAS NOT KNOWN WHERE FROM THE LD. CIT HAS ADAPTED THIS REASON OF SELECTION. THEREFORE, ON THE FACE OF THE RECORD, NO FAULT COULD BE FIND IN THE SUBJECTED ASSESSMENT ORD ER ON THIS ASPECT. THUS, ON THIS ASPECT ALSO THE AO COULD NOT HAVE PRO CEEDED TO EXAMINE THE APPLICATION OF S. 56(2)(VIIB) AND S. 263 COULD NOT HAVE BEEN INVOKED. 7.2. SUPPORTING CASE LAWS: THE LAW IS WELL SETTLED THAT IN THE LIMITED SCRUTIN Y ASSESSMENT, THE AO CAN BE EXPECTED TO MAKE ENQUIRY ONLY TO THE EXTENT OF T HE REASON/ BASIS OF SELECTION OF THE CASE FOR THE LIMITED SCRUTINY AND THE CIT CANNOT INVOKE S. 263 ON THE ISSUES WHICH WERE NOT MADE BASIS FOR SEL ECTION OF THE CASE. 7.2.1 KINDLY REFER MAHENDRA SINGH DHANKAR (HUF) VS. ACIT, (2021) 35 NYPTTJ 458 (JP) (DPB 34-43) 7.2.2 IN CIT V/S SMT. PADMAVATHI (2020) 4 NYPCTR 68 2 (MAD) 7.3.3 IN SU-RAJ DIAMOND DEALERS (P) LTD. V/S PCIT ( 2020) 203 TTJ (MUMBAI) 137 (DPB 44-50) 7.3.4 IN NAYEK PAPER CONVERTERS VS. ACIT (2005) 93 TTJ (CAL) 8.1 APPLICABILITY OF S.56(2) (VIIB): THE LD. CIT ALSO ALLEGED THAT THE AO DID NOT MAKE E NQUIRIES AND VERIFICATION ON THE ISSUE OF LARGE SHARE PREMIUM RE CEIVED BY THE ASSESSE AND THE APPLICABILITY OF S.56(2)(VIIB) AND OTHER RE LEVANT SECTIONS EVEN THOUGH THIS WAS NOT THE REASON FOR SCRUTINY SELECTI ON. 8.2 ALTERNATIVELY AND WITHOUT PREJUDICE TO ABOVE, E VEN OTHERWISE ON MERITS, THERE HAS BEEN DUE AND PROPER APPLICATION O F MIND IN AS MUCH AS THE LD. AO RAISED DIRECTLY RELEVANT QUERIES (AS STA TED ABOVE) WHICH WERE DULY REPLIED BY THE ASSESSE AS WELL. THE ASSESSE AL SO SUBMITTED THE COMPUTATION AS TO HOW THE ASSESSE DERIVED THE AMOUN T OF THE PREMIUM WHICH WAS ALSO ADMITTED BY THE LD. CIT IN PARA 3 PG 4 OF THE IMPUGNED ORDER. IN ADDITION, THERETO, THE ASSESSE ALSO SUBMI TTED A REPORT OF THE EXPERT DATED 10.10.2015 UNDER RULE 11UA (PB 46-58) WHICH FULLY JUSTIFIED CHARGING PREMIUM @ RS 50 PER SHARE. HENCE, THE AO W AS FULLY JUSTIFIED IN NOT APPLYING IN S. 56(2)(VIIB). THERE APPEARS NO VA LID BASIS TO COMPUTE ITA 09/JP/2021_ ANNU AGROTECH P LTD. VS PR.CIT 24 EXCESSIVE VALUE OF RS 1.73 PER SHARE WHICH IS NOT S UPPORTED BY ANY EXPERT REPORT BUT MERE SUSPICION. IN OTHER WORDS, IT WAS N OTHING BUT A SUBSTITUTION OF OPINION BY THE LD. CIT. THEREFORE, ON THIS ASPECT ALSO THE SUBJECTED ASSESSMENT ORDER COULD NOT BE COVERED U/S 263 AS IT WAS NEITHER ERRONEOUS NOR PREJUDICIAL TO THE INTEREST O F THE REVENUE. HE ALSO GOT VALUATION DONE U/R 11UA BY EXPERT WHICH IS BIND ING UPON AO, AS HELD IN RAMESHWARAM STRONG GLASS PVT LTD VS. AO 195 TTJ4 65 (JP) . WE ALSO RELY ON W/S TO THE CIT ( PB 69-72). 9. THE ALLEGATION OF THE LD. CIT THAT VARIOUS EVIDE NTIAL DOCUMENTS WERE FURNISHED ITSELF GOES TO SHOW THAT THE AO DID NOT M AKE REQUISITE ENQUIRIES, IS NOT A GOOD BASIS TO INVOKE S.263 AND IS MERE SUS PICION AND SUBSTITUTION OF OPINION. MOREOVER, ONCE ALL THE DETAILS WERE MAD E AVAILABLE BEFORE THE CIT, HE SHOULD NOT HAVE DECIDED THE ISSUES INSTEAD OF SETTING ASIDE TO THE AO. KINDLY REFER ELDER IT SOLUTIONS (P.) LTD. VS CI T (INFRA). 10. EVEN THE AMENDMENT (EXPL. 2(A)) DOES NOT CONFER BLIND POWERS: IT IS HELD THAT DESPITE THERE BEING AN AMENDMENT, ENLARGI NG THE SCOPE OF THE REVISIONARY POWER OF THE LD. PCIT U/S 263 TO SOME E XTENT, IT CANNOT JUSTIFY THE INVOKING OF THE EXPL. 2(A) IN THE FACTS OF THE PRESENT CASE. BEFORE REFERRING TO THAT EXPLANATION, ONE HAS TO UNDERSTAN D WHAT WAS THE TRUE MEANING OF THE EXPLANATION IN THE CONTEXT OF APPLIC ATION OF MIND BY A QUASI-JUDICIAL AUTHORITY. IN THE CASE OF NARAYAN TATU RANE VS. ITO ITAT, (201 3) 7 NYPTTJ 1493 (MUM) (DPB 59-68) IT WAS HELD THAT NEWLY INSERTED E XPLANATION 2(A) TO SEC. 263 DOES NOT AUTHORIZE OR GIVE UNFETTERED POWE RS TO COMMISSIONER TO REVISE EACH AND EVERY ORDER, IF IN HIS (SUBJECTI VE) OPINION, SAME HAS BEEN PASSED WITHOUT MAKING ENQUIRIES OR VERIFICATIO N WHICH SHOULD HAVE BEEN MADE. 11. SUPPORTING CASE LAWS ON S. 263: 11.1 CIT V/S RAJASTHAN FINANCIAL CORPORATION (1996) 134 CTR 145 (RAJ). (DPB 51-54) 11.2 CIT V/S GANPAT RAM BISHNOI (2005) 198 CTR (RAJ ) 546 (DPB 55-58) 11.3 GABRIEL INDIA LTD. [1993] 203 ITR 108 (BOM), ITA 09/JP/2021_ ANNU AGROTECH P LTD. VS PR.CIT 25 11.4 ELDER IT SOLUTIONS (P.) LTD. VS CIT [2015] 59 TAXMANN.COM 232 (MUMBAI - TRIB.) 11.5 RAJMAL KANWAR V. CIT-I [2017] 82 TAXMANN.COM 1 19 (JAIPUR - TRIB.) 11.6 ABDUL HAMID V. INCOME-TAX OFFICER [2020] 117 T AXMANN.COM 986 (GAUHATI - TRIB.) 11.7 CIT V/S VIKAS POLYMERS 341 (2012) ITR 0537 (DE L) IN VIEW OF THE ABOVE SUBMISSIONS AND THE JUDICIAL G UIDELINE, THE IMPUGNED ORDER PASSED U/S 263 DESERVES TO BE QUASHE D. THE ABOVE SUBMISSIONS ARE BASED ON THE FACTS & INFO RMATION MADE AVAILABLE AND AS PER INSTRUCTIONS OF THE APPELLANT. 6. ON THE OTHER HAND, THE LD CIT-DR HAS RELIED ON T HE ORDER PASSED BY THE LD. PR.CIT. 7. WE HAVE HEARD THE LD. COUNSELS OF BOTH THE PARTI ES AND HAVE PERUSED THE MATERIAL PLACED ON RECORD. WE HAVE ALSO DELIBERATED UPON THE DECISIONS CITED IN THE ORDERS PASSED BY THE AUT HORITIES BELOW AS WELL AS CITED BEFORE US AND WE HAVE ALSO GONE THROUGH TH E ORDERS PASSED BY THE REVENUE AUTHORITIES. AS PER FACTS OF THE PRESEN T CASE, WE NOTICED THAT THE ASSESSE, A PRIVATE LIMITED COMPANY, DERIVED INC OME FROM GRADING, CLEANING AND STORAGE OF AGRICULTURE COMMODITY. IT H AD FILED ITS RETURN OF INCOME FOR THE YEAR UNDER APPEAL ON 14.10.2016 DECL ARING INCOME OF RS. 2,07,940/- AND BOOK PROFIT DECLARED OF RS. 2,15,690 /- U/S 115JB(2) OF THE ACT WITH TAX INCLUDING INTEREST OF RS. 41,100/ U/S 115JB(1) OF THE ACT. THEREAFTER, THE A.O. BY PASSING THE ASSESSMENT ORDE R U/S 143(3) OF THE ITA 09/JP/2021_ ANNU AGROTECH P LTD. VS PR.CIT 26 ACT ACCEPTED THE RETURNED INCOME FILED BY THE ASSES SEE. THEREAFTER, THE LD. PR.CIT PASSED THE IMPUGNED ORDER MENTIONING THE FACT THAT THE ASSESSMENT ORDER DATED 16.11.2018 PASSED BY THE AO IS ERRONEOUS IN SO FAR AS IT IS PREJUDICIAL TO THE INTEREST OF REVENUE . 7. FROM PERUSAL OF THE RECORD, WE OBSERVED THAT THE PRE-REQUISITES TO EXERCISE OF JURISDICTION BY THE LD. PR.CIT U/S 263 OF THE ACT IS THAT THE ORDER OF THE AO IS ESTABLISHED TO BE ERRONEOUS IN S O FAR AS IT IS PREJUDICIAL TO THE INTEREST OF THE REVENUE. THE PR. CIT HAS TO BE SATISFIED OF TWIN CONDITIONS, NAMELY (I) THE ORDER OF THE AO SOUGHT T O BE REVISED IS ERRONEOUS; AND (II) IT IS PREJUDICIAL TO THE INTERE STS OF THE REVENUE. IF ANY ONE OF THEM IS ABSENT I.E. IF THE ASSESSMENT ORDER IS NOT ERRONEOUS BUT IT IS PREJUDICIAL TO THE REVENUE, SEC.263 CANNOT BE IN VOKED. THIS PROVISION CANNOT BE INVOKED TO CORRECT EACH AND EVERY TYPE OF MISTAKE OR ERROR COMMITTED BY THE AO; IT IS ONLY WHEN AN ORDER IS ER RONEOUS AS ALSO PREJUDICIAL TO REVENUES INTEREST, THAT THE PROVISI ON WILL BE ATTRACTED. AN INCORRECT ASSUMPTION OF THE FACT OR AN INCORRECT AP PLICATION OF LAW WILL SATISFY THE REQUIREMENT OF THE ORDER BEING ERRONEOU S. THE PHRASE 'PREJUDICIAL TO THE INTEREST OF THE REVENUE' HAS TO BE READ IN CONJUNCTION WITH AN ERRONEOUS ORDER PASSED BY THE AO. EVERY LOS S OF REVENUE AS A CONSEQUENCE OF THE ORDER OF THE AO CANNOT BE TREATE D AS PREJUDICIAL TO THE INTEREST OF THE REVENUE. FOR EXAMPLE, IF THE AO HAS ADOPTED ONE OF ITA 09/JP/2021_ ANNU AGROTECH P LTD. VS PR.CIT 27 THE TWO OR MORE COURSES PERMISSIBLE IN LAW AND IT H AS RESULTED IN LOSS OF REVENUE, OR WHERE TWO VIEWS ARE POSSIBLE AND AO HAS TAKEN ONE VIEW WITH WHICH THE CIT DOES NOT AGREE, IT CANNOT BE TRE ATED AS AN ERRONEOUS ORDER AND IT IS PREJUDICIAL TO THE INTEREST OF THE REVENUE, UNLESS THE VIEW TAKEN BY THE AO IS TOTALLY UNSUSTAINABLE IN LAW. IN THIS REGARD, WE DRAW STRENGTH FROM THE DECISION OF THE HONBLE SUPREME C OURT IN THE CASE OF MALABAR INDUSTRIAL CO. LTD. V/S CIT ( 2000) 243 ITR 83 (SC) . WE ALSO DRAW STRENGTH FROM THE DECISION OF THE HONBLE SUPREME COURT IN THE CASE OF CIT V/S MAX INDIA LTD. (2007) 295 ITR 282 (SC) WHEREIN IT WAS HELD THAT: 'THE PHRASE 'PREJUDICIAL TO THE INTERESTS OF THE REV ENUE' IN S. 263 OF THE INCOME TAX ACT, 1961, HAS TO BE READ IN CONJUNCTION WITH T HE EXPRESSION 'ERRONEOUS' ORDER PASSED BY THE AO. EVERY LOSS OF REVENUE AS A CONSEQUENCE OF AN ORDER OF THE AO CANNOT BE TREATED AS PREJUDICIAL TO THE INTE RESTS OF THE REVENUE. FOR EXAMPLE, WHEN THE AO ADOPTS ONE OF TWO COURSES PERM ISSIBLE IN LAW AND IT HAS RESULTED IN LOSS OF REVENUE, OR WHERE TWO VIEWS ARE POSSIBLE AND THE AO HAS TAKEN ONE VIEW WITH WHICH THE COMMISSIONER DOES NOT AGREE, IT CANNOT BE TREATED AS AN ERRONEOUS ORDER PREJUDICIAL TO THE RE VENUE, UNLESS THE VIEW TAKEN BY THE AO IS UNSUSTAINABLE IN LAW.' 8. IT IS SUBMITTED BY THE LD. AR THAT THE AO HAD RA ISED VERY SPECIFIC AND DIRECTLY RELEVANT QUERIES/CALLED FOR EXPLANATIO N AND EVIDENCES W.R.T. THE IDENTITIES AND CREDITWORTHINESS GENUINENESS OF THE RECEIPTS TOWARDS THE SHARE PREMIUM OF RS. 1.08 CR AND APPLICABILITY OF S.56(2)(VIIB); TO THE EXTENT HE WAS SUPPOSED TO ACT IN LAW. THE RELEVANT PARA OF THE ASSESSMENT ORDER, WHEREIN THE AO HAS EXAMINED EACH ANY EVERY ITA 09/JP/2021_ ANNU AGROTECH P LTD. VS PR.CIT 28 DOCUMENTS SUBMITTED BY ASSESSEE DURING SCRUTINY PRO CEEDINGS, IS REPRODUCED BELOW: THE ASSESSEE COMPANY HAS FILED ITS E-ITR ON 14.10. 2016 DECLARING A TOTAL INCOME AT RS.2,07,940 AND BOOK PROFIT DECLARED OF R S.2,15,690 U/S 115JB(2) OF THE INCOME-TAX ACT, 1961 (THE ACT) WITH TAX INCLUDI NG INTEREST OF RS.41,100 U/S 115JB(1) OF THE ACT FOR THE YEAR UNDER CONSIDERATIO N. THEREAFTER, THE CASE WAS SELECTED FOR LIMITED SCRUTINY ASSESSMENT THROUGH CO MPUTER AIDED SCRUTINY SELECTION (CASS) FOR THE ISSUE THAT WHETHER THE FU NDS RECEIVED IN THE FORM OF SHARE PREMIUM ARE FROM DISCLOSED SOURCES AND HAVE B EEN CORRECTLY OFFERED FOR TAX. AND NOTICE U/S 143(2) OF THE ACT ISSUED ON 12 .08.2017 FOR 29.08.2017 DULY SERVED UPON THE ASSESSEE COMPANY THROUGH ITS REGIST ERED E-MAIL. SUBSEQUENTLY, NOTICES U/S 142(1) OF THE ACT ISSUED ON 25.06.2018 AND 09.09.2018 FOR 03.07.2018 AND 19.09.2018 RESPECTIVELY DULY SERVED UPON THE ASSESSE COMPANY THROUGH ITS REGISTERED E-MAIL. IN RESPONSE TO THOSE NOTICES, THE ASSESSEE COMPANY THROUGH ITS AUTHORIZED SIGNATORY AND REPRES ENTATIVE CA DHARM CHAND JAIN, WHO IS DIRECTORS OF THE ASSESSEE COMPANY FIL ED THE REQUIRED INFORMATION AND DOCUMENTS FROM TIME TO TIME. ON EXAMINING THE INFORMATION, MATERIAL AND DOCUMENT S FURNISHED BY THE ASSESSEE COMPANY IN ITS E-ITR AND DURING ASSESSMENT PROCEEDINGS THROUGH ITS AUTHORIZED SIGNATORY, IT HAS FOUND THAT THE ASSESSE E COMPANY HAS INCREASED ITS SHARE CAPITAL WITH SHARE PREMIUM WHICH VALUED IN AC CORDANCE TO THE RELEVANT PROVISIONS OF THE ACT AS EXPLAINED BY THEM. THEREFO RE, NO ADVERSE INFERENCE IS HEREBY DRAWN ON THE ISSUE OF THE FUNDS RECEIVED IN THE FORM OF SHARE PREMIUM. 9. IT WAS ALSO EVIDENT FROM THE NOTICE/S U/S 143(2) DATED 12.08.2017, WHICH ARE AT PAGE NOS. 4-8 OF THE PAPER BOOK, THERE TO CALLED FOR EXPLANATION AS UNDER: FOLLOWING ISSUE(S) HAVE BEEN IDENTIFIED FOR EXAMIN ATION: II. WHETHER THE FUNDS RECEIVED IN THE FORM OF SHARE PRE MIUM ARE FROM DISCLOSED SOURCES AND HAVE BEEN CORRECTLY OFFERED F OR TAX. IN VIEW OF THE ABOVE, I WOULD LIKE TO GIVE YOU AN O PPORTUNITY TO PRODUCE ANY EVIDENCE/INFORMATION WHICH YOU FEEL IS NECESSARY IN SUPPORT OF THE SAID RETURN OF INCOME ON OR BEFORE 29/08/2017 AT 11:30 A M. ITA 09/JP/2021_ ANNU AGROTECH P LTD. VS PR.CIT 29 REPLY TO THE ABOVE NOTICE WAS SUBMITTED BY THE ASSE SSEE ON 29.08.2017, WHICH ARE AVAILABLE AT PAGE NO. 8 OF THE PAPER BOOK, AS UNDER : WITH REFERENCE TO THE ABOVE SUBJECT IT IS SUBMITTE D THAT THE SHARES HAVE BEEN ISSUED IN THE FORM OF SHARE PREMIUM FROM DISCLOSED SOURCES . IT IS SUBMITTED THAT THE NET WORTH OF THE COMPANY AS ON 31.03.2015 IS RS. 55,47,060/- AND ESTIMATED PROFIT UPTO THE DATE OF ISSUE OF SHARES W AS RS. 62,940/-, HENCE TOTAL NET WORTH OF THE COMPANY DEEMED IS RS. 56,10,000/-. TOTAL 93,500 SHARES HAVE BEEN ISSUED. BOOK VALUE OF THE SHARE WAS RS. 60/- A ND THE COMPANY HAS ISSUED RIGHTS ISSUE AS PER BOOK VALUE OF THE COMPANY. 10 RUPEES FACE VALUE SHARES HAS BEEN ISSUED AT THE PREMIUM OF RS. 50/- I.E. @ RS. 6 0/- PER SHARE, HENCE AS PER BOOK VALUE THE RIGHTS ISSUE HAS BEEN ALLOTTED. WE WANT A PERSONAL HEARING THE CASE AND DO NOT WANT E-PROCEEDING FACILITY THROUGH OUR ACCOUNT IN E-FILING WEBSITE OF THE INCO ME TAX DEPARTMENT. WE OPTED OUT E-ASSESSMENT PROCEEDINGS. 10. THEREAFTER, IN NOTICE U/S 142(1) DATED 25.06.20 18, WHICH ARE AT PAGE NO. 9-11OF THE PAPER BOOK, THE AO RAISED MORE QUERIES ON THE ISSUE IN HAND AS UNDER: 3. TO FURNISH COPY OF DIRECTORS AND AUDITORS REP ORT WITH FINANCIAL STATEMENTS AS ON 31.03.2014, 31.03.2015 & 31.03.2016. 4. TO FURNISH COMPLETE DETAIL OF BANK ACCOUNTS & PO ST OFFICE ACCOUNTS AND OTHER FINANCIAL INSTITUTION ACCOUNTS MANAGED/OPERATED IN THE TABLE GIVEN BELOW 5. TO EXPLAIN WITH SUPPORTING DOCUMENTS THAT WHETHE R THE FUNDS RECEIVED IN THE FORM OF SHARE PREMIUM ARE FROM DISCLOSED SOURCES AN D HAVE BEEN CORRECTLY OFFERED FOR TAX. THE SAME WAS REPLIED VIDE LETTER DATED 08.08.2018, WHICH IS AT PAGE NO. 11 OF THE PAPER BOOK, WHICH READS AS UNDER: 3. COPIES OF THE DIRECTORS REPORT AND AUDITORS REPORT FOR THE FY ENDED ON 31.03.2014, 31.03.2015 & 31.03.2016 ARE ENCLOSED. 4. DETAILS OF BANK ACCOUNT ARE ENCLOSED IN THE FOR MAT PROVIDED BY YOU. ITA 09/JP/2021_ ANNU AGROTECH P LTD. VS PR.CIT 30 5. IN RESPECT OF POINT NO. 5 : IT IS SUBMITTED THA T THE SHARES HAVE BEEN ISSUED IN THE FORM OF SHARE PREMIUM FROM DISCLOSED SOURCES . THE AO AGAIN ISSUED A NOTICE U/S 142(1) DATED 09.09 .2018, WHICH ARE AT PAGE NO. 12-13 OF THE PAPER BOOK, CALLING FOR EXPLA NATION, DIRECTLY ON THE ISSUES IN HAND, AS UNDER: PARTICULARS OF ACCOUNTS AND/OR DOCUMENTS REQUIRED. 1. TO EXPLAIN WITH SUPPORTING DOCUMENTS THAT WHETHE R THE FUNDS RECEIVED IN THE FORM OF SHARE PREMIUM ARE FROM DISCLOSED SOURCES AN D HAVE BEEN CORRECTLY OFFERED FOR TAX. 2. TO PROVE THE GENUINENESS TO TRANSACTIONS WITH PR OVING THE IDENTITY OF PERSONS AND EXPLAIN THEIR CREDITWORTHINESS REGARDING RECEIP TS OF SHARE CAPITAL AND SHARE PREMIUM. 3. TO EXPLAIN AND JUSTIFY WITH SUPPORTING DOCUMENTS THAT WHETHER THE PROVISIONS OF SECTION 56(2)(VIIB) OF THE INCOME-TAX ACT, 1961 READ WITH RULE 11UA(2) OF THE INCOME-TAX RULES, 1962 ARE NOT APPLICABLE ON RECEIP TS OF SHARE PREMIUM. 4. ON PERUSAL OF YOUR SUBMISSIONS AND DOCUMENTS, IT IS NOTICED THAT FMV OF UNQUOTED SHARES WHICH ALLOTTED DURING THE YEAR UNDE R CONSIDERATION IS COME AT RS.57.67 AGAINST CALCULATING BY YOU OF RS.60 IN TER MS OF PROCEDURE PROVIDED UNDER RULE 11UA(2) OF THE INCOME-TAX RULES, 1962 I. E., A-L/PE*PV = (7231418- 733000)- (64254+1111000+491891)/935000*10. THUS, TH ERE IS A DIFFERENCE COMES OF RS.14,99,400 IS WHY NOT TO BE ADDED TO YOU R TOTAL TAXABLE INCOME IN TERMS OF SECTION 56(2)(VIIB) OF THE INCOME-TAX ACT, 1961. THE SAME WAS DULY REPLIED VIDE LETTER DATED NIL A ND DATED 12.11.2018 WHICH ARE AT PAGE NO. 14-19 OF THE PAPER BOOK, ON A LL THE QUERIES RAISED. THE ASSESEE PROVIDED COMPLETE NAME AND PAN OF ALL T HE THREE SHAREHOLDERS. TO PROVE THEIR GENUINENESS, THE ASSES EE ALSO SUBMITTED COPIES OF ITR ACKNOWLEDGEMENTS (PB 29-40) AND THE C ONFIRMATIONS DULY SIGNED BY THEM (PB 43-45), TO WHOM THE SHARES WERE ALLOTTED. THE ASSESEE ALSO SUBMITTED JUSTIFICATION BEHIND THE PRE MIUM @ RS 50/- PER SHARE CHARGED AS UNDER: ITA 09/JP/2021_ ANNU AGROTECH P LTD. VS PR.CIT 31 1 THAT WE HAVE ALLOTTED THE SHARES ON PREMIUM AS P ER FOLLOWING CALCULATION: NET ASSETS VALUE AS ON 31.03.2015 : 72,31,418.00 LESS: LIABILITIES : 4,91,891.00 : 11,73,787.00 16,65,678.00 5565740/ 93500 = 59.53 AS ON 31.03.2015 AND AS PER FAIR MARKET VALUE WHICH IS RS. 60/- PER SHARE. X X X X AS PER CALCULATION WE HAVE TAKEN THE PREMIUM AS PER VALUE OF THE SHARES I.E. FACE VALUE IS RS. 10 PER SHARE AND PREMIUM OF RS. 5 0/- PER SHARE HENCE TOTAL VALUE IS RS. 60/- PER SHARE AND THERE IS NO TAX LIA BILITY ON SHARE PREMIUM AS THEY ARE FROM DISCLOSED SOURCES. THE ASSESSE ALSO SUBMITTED THE COPY OF BANK STATEME NTS OF THE ASSESSE COMPANY WHICH ARE AT PAGE NO. 24-28 OF THE PAPER BO OK. 11. WE OBSERVED THAT THE LD. AR PRODUCED BOOKS OF A CCOUNT INCLUDING CASH BOOK, LEDGER, SUBSIDIARY RECORDS AND FILED VAR IOUS OTHER DETAILS AS REQUIRED, WHICH WERE DULY EXAMINED. THE AO MADE ALL THE INQUIRIES, SOUGHT CLARIFICATIONS ON ALL THE RELEVANT ASPECTS T O THE EXTENT HE WAS SUPPOSED LOOKING TO THE NATURE OF THE ISSUE INVOLVE D THE PAST ACCEPTED HISTORY OF THE CASE AND THE EVIDENCES AND MATERIAL ALREADY AVAILABLE THEREIN TOGETHER WITH THE MATERIAL PROVIDED DURING THE ASSESSMENT PROCEEDINGS. IN THE PRESENT CASE, THE AO WAS HAVING COMPLETE DETAILS OF THE IDENTITY IN THE SHAPE OF PAN NUMBER & ADDRESS ( PB 29-40). HE WAS ALSO HAVING CONFORMATION OF THE PARTIES (PB 43-45) DULY SIGNED BY THE SHAREHOLDER. AS STATED, HE WAS ABLE AND HE LOOKED I NTO THE FILE OF THE ITA 09/JP/2021_ ANNU AGROTECH P LTD. VS PR.CIT 32 SHAREHOLDERS IN THE PORTAL OF THE DEPARTMENT. IN TH IS REGARD, WE DRAW STRENGTH FROM THE DECISION AS RELIED BY THE LD. AR IN THE CASE OF LABHCHAND BOHRA V/S ITO (2008) 8 DTR 44 (RAJ .), THE HONBLE HIGH HAS HELD THAT CASH CREDIT- BURDEN OF PROOF- IDENTITY OF THE CRED ITORS ESTABLISHED AND THE CONFIRMED THE CREDIT. THIS DISCHARGED THE BURDEN OF APPELLANT TO PROVE GENUINENESS. HOWEVER, CAPACITY OF THE LENDER TO ADV ANCEMENT MONEY TO APPELLANT WAS NOT A MATTER WHICH THE APPELLANT COUL D BE REQUIRED TO ESTABLISH AND THAT WOULD AMOUNT TO CALLING UPON HIM TO ESTABL ISH THE SOURCE OF SOURCE. HENCE ADDITION CANNOT BE SUSTAINED. IN THE CASE OF ARAVALI TRADING CO. V/S ITO (2008) 8 DTR 199 (RAJ) IT HAS BEEN HELD THAT: ONCE THE EXISTENCE OF THE CREDITORS IS PROVED AND SUCH PERSONS OWN THE CREDITS WHICH ARE FOUND IN THE BOOKS OF THE APPELLANT, THE APPELLANTS ONUS STAND DISCHARGED AND THE LATTER IS NOT FURTHER REQUIRED T O PROVE THE SOURCES FROM WHICH THE CREDITORS COULD HAVE ACQUIRED THE MONEY D EPOSITED WITH HIM AND, THEREFORE THE ADDITION U/S 68 CANNOT BE SUSTAINED I N THE ABSENCE OF ANYTHING TO ESTABLISH THAT THE SOURCES OF THE CREDITORS DEPOSIT S FLEW FROM THE APPELLANT ITSELF. IN THE CASE OF CIT V. G. M. MITTAL STAINLESS STEEL (P.) LTD. [2003] 263 ITR 255 (SC) WHEREIN THE HONBLE APEX COURT HAS HELD AS UNDER: PRECEDENTBINDING NATURE OF JUDGMENTDECISION OF T HE JURISDICTIONAL HIGH COURTWHERE THE DECISION OF THE JURISDICTIONAL HIGH COURT HAS NOT BEEN SET ASIDE OR AT LEAST HAS NOT BEEN APPENDED FROM IT WOU LD BE BINDINGIN VIEW OF THIS CIT PROCEEDING ON THE BASIS OF THE HIGH COURT OTHER THAN JURISDICTIONAL HIGH COURT ON THE BASIS THAT JURISDICTIONAL HIGH COURT W AS ERRONEOUS AND THAT THE AO WHO HAD ACTED IN TERMS OF THE HIGH COURTS DECISION HAD ACTED ERRONEOUSLY, WAS NOT JUSTIFIED ITA 09/JP/2021_ ANNU AGROTECH P LTD. VS PR.CIT 33 IN VIEW OF THE ABOVE, WE OBSERVED THAT THE AO RAISE D VERY SPECIFIC AND DIRECTLY RELEVANT QUERIES/CALLED FOR EXPLANATION AN D EVIDENCES W.R.T. SOURCE OF AMOUNT RECEIVED BY THE COMPANY FROM THREE . 12. WE ALSO OBSERVED THAT THE FACTS ARE NOT DENIED THAT THE ASSESSE HAD ALREADY SUBMITTED COMPLETE ADDRESSES OF ALL THE THREE SHAREHOLDERS AS ALSO THEIR PERMANENT ACCOUNT NUMBER (PAN) WHICH IS THE BEST EVIDENCE TO PROVE THE IDENTITY OF A SHAREHOLDER, IN THE RECORDS OF AO ITSELF. MOREOVER, ALL THE TRANSACTIONS WITH ALL THE SHAREHOLDERS WERE ADMITTEDLY MADE THROUGH BANKING CHANNELS ONLY. THUS , THEIR IDENTITY IS FULLY ESTABLISHED. THE GENUINENESS OF THE TRANSACTI ON IS FULLY ESTABLISHED INASMUCH AS ALL THE BORROWINGS WERE MADE THROUGH AC COUNT PAYEE CHEQUE ONLY AND THE SAME WAS DULY VERIFIED BY THE A O FROM THE BANK STATEMENT OF THE ASSESSE COMPANY FILED BEFORE HIM, WHEREIN THE FACT AND THE RECEIPT OF THE SUBJECTED AMOUNT TOWARDS THE ALL OTMENT OF SHARE, WAS CLEARLY VISIBLE AND WAS DULY VERIFIED BY THE AO. AP ART FROM THE BANK STATEMENT, THE AO WAS ALSO HAVING THE LEDGER ACCOUN TS OF THE BANK IN THE ACCOUNT BOOKS MAINTAINED BY THE ASSESSE AND PRODUCE D BEFORE HIM AS ALSO THROUGH THE CONFIRMATION OF ALL THE THREE SHAR EHOLDERS CONTAINING COMPLETE DETAILS I.E. THE AMOUNT, DATE, CHEQUE NUMB ER ETC. IT IS NOT THE CASE OF THE REVENUE THAT THE BORROWING WAS MADE IN CASH SO AS TO JUSTIFY ANY SUSPICION. THERE WAS NO CASH DEPOSIT MADE IN TH EIR BANK A/C JUST ITA 09/JP/2021_ ANNU AGROTECH P LTD. VS PR.CIT 34 PRIOR TO ISSUE OF CHEQUE TO THE ASSESSEE COMPANY. F OR THE COMPLETENESS, THE DETAILS OF THE AMOUNT RECEIVED FROM THE SHAREHO LDERS IS AS UNDER: SMT. CHELNA DEVI JAIN, PAN AGTPJ3772H: S.NO. NAME OF SHARE- HOLDER NO. OF SHARES ISSUED DURING THE YEAR AMOUNT OF TOTAL SHARES 1 SMT. CHELNA DEVI JAIN 63,475 38,08,500 THE PAYMENT RECEIVED BY THE COMPANY IN ITS BANK ACC OUNT MAINTAINED WITH SBBJ HAVING NO 61264902049 ON DATED AS UNDER: DATE AMOUNT IN RS. 18.12.2015 16,92,000 28.01.2016 21,16,500 TOTAL 38,08,500 SHRI MANOHAR LAL JAIN, PAN ATZPS8153L S.NO. NAME OF SHARE-HOLDER NO. OF SHARES ISSUED DURING THE YEAR AMOUNT OF TOTAL SHARES 2 SHRI MANOHAR LAL JAIN 28,900 17,34,000 THE PAYMENT RECEIVED BY THE COMPANY IN ITS BANK ACC OUNT MAINTAINED WITH SBBJ HAVING NO 61264902049 ON DATED AS UNDER: DATE AMOUNT IN RS. 18.12.2015 7,71,000 28.01.2016 9,63,000 TOTAL 17,34,000 SHRI DHARM CHAND JAIN, PAN ABRPJ4861E S.NO. NAME OF SHARE-HOLDER NO. OF SHARES ISSUED DURING THE YEAR AMOUNT OF TOTAL SHARES 3 SHRI DHARM CHAND JAIN 87,625 52,57,500 ITA 09/JP/2021_ ANNU AGROTECH P LTD. VS PR.CIT 35 THE PAYMENT RECEIVED BY THE COMPANY IN ITS BANK ACC OUNT MAINTAINED WITH SBBJ HAVING NO 61264902049 ON DATED AS UNDER: DATE AMOUNT IN RS. 18.12.2015 23,37,000 28.01.2016 29,20,500 TOTAL 52,57,500 13. WE ALSO OBSERVED FROM PERUSAL OF THE RECORD THA T THE CREDITWORTHINESS OF THE SHAREHOLDERS ALSO STANDS FU LLY ESTABLISHED INASMUCH AS THE DIRECT SOURCE OF THE AMOUNTS GIVEN WAS THE INCOME DECLARED YEAR TO YEAR BY THE RESPECTIVE SHAREHOLDER S IN THEIR RETURN OF INCOME (ACCUMULATED SAVINGS) AND LOAN TAKEN FROM OU TSIDER BUT FINALLY DEPOSITED IN THE RESPECTIVE BANK ACCOUNTS BY THE SH AREHOLDERS. THE ASSESSEE NOT ONLY SUBMITTED THEIR PAN NO. BUT ALSO PROVIDED COPIES OF ACKNOWLEDGEMENT OF FILING RETURN OF INCOME WHICH CO NTAINS THE COMPUTATION OF TOTAL INCOME. THE AO DIRECTLY INQUIR ED DEEPER INTO THE ASSESSMENT RECORD OF THE CONCERNED SHAREHOLDER ON T HE PORTAL OF INCOME TAX DEPARTMENT WITH REFERENCE TO THE RESPECTIVE PAN NO. GIVEN BY THE ASSESSEE. NEEDLESS TO SAY THAT THE ENTIRE INFORMATI ON OF THAT PARTICULAR SHAREHOLDER BEING THE BALANCE SHEET, DETAILS OF INC OME DECLARED, SUBJECTED TRANSACTIONS DONE WITH THE ASSESSE COMPAN Y IN THE CURRENT YEAR AS ALSO HIS CREDITWORTHINESS/ FINANCIAL CAPACITY WA S DULY VERIFIED BY THE AO. ORAL EXPLANATION WERE ALSO MADE DURING THE PERS ONAL HEARING. THE LD ITA 09/JP/2021_ ANNU AGROTECH P LTD. VS PR.CIT 36 PR.CIT, IN FACT, DID NOT APPLY HIS MIND ON THIS ASP ECT AND IGNORED THAT THE AO WAS EMPOWERED LEGALLY AND TECHNICALLY TO HAVE EX AMINED THE VERACITY OF THE CLAIM MADE BY THE ASSESSE WITH REGARD TO THE CREDITWORTHINESS OF THE SHAREHOLDERS. THEREFORE, THE ALLEGATION AND THE EXPECTATION OF THE LD. PR.CIT FROM THE AO ACTING AS QUASI-JUDICIAL AUTHORI TY, EXAMINE THE RECEIPTS IN CONTEXT WITH THE S. 68 AND REQUIRING TH E ASSESSE TO PROVE THE CREDIT TO THE HILT, IS CLEARLY BEYOND THE SCOPE OF S. 263, INASMUCH AS HE WAS SUPPOSED, ONLY TO THE EXTENT OF EXAMINATION OF THE FACT THAT THE AMOUNT SO RECEIVED TOWARDS THE SHARE PREMIUM WAS NO T FROM UNDISCLOSED SOURCES (IF ONE STRICTLY GO BY THE REASON OF SELECT ION FOR LIMITED SCRUTINY) OR TO EXAMINE THE CONDITIONS AS PER THE HONBLE JUR ISDICTIONAL HIGH COURT DECISIONS. 14. FURTHER THE UNDISPUTED FACTS ARE THAT ALL THE T HREE SHAREHOLDERS WERE ALLOTTED EQUITY SHARES AS PER THE DETAILS GIVE N AT PG 2 OF THE IMPUGNED ORDER IN CONSIDERATION OF RS. 60 PER SHARE . NECESSARY FORMALITY OF FILING RETURN OF ALLOTMENT AND MAKING ENTRIES IN THE RECORD WERE COMPLETED AS PER THE PROVISIONS OF THE COMPANIES AC T, 2013. THUS, THE SUBJECTED RECEIPTS OF RS. 1.08 CR FROM THE THREE SH AREHOLDERS WAS IN CONSIDERATION OF THE 1.80 LAKHS EQUITY SHARES. SUCH CREDITS WERE NOT LOAN/ BORROWINGS TO BE TERMED AS CASH CREDITS U/S 68. THE LAW IS WELL SETTLED AND MORE PARTICULARLY, BY THE DECISION OF THE HONB LE RAJASTHAN HIGH ITA 09/JP/2021_ ANNU AGROTECH P LTD. VS PR.CIT 37 COURT THAT RECEIPT OF THE CONSIDERATION IN THE EXCH ANGE OF THE MOVABLE/ IMMOVABLE PROPERTY OR ANYTHING, IS A CASE OF SELF-E XPLANATORY CREDIT, HENCE U/S 68 SHOULD NOT BE APPLIED. IN THE CASE OF SMT. HARSHILA CHORDIYA VS. ITO (2008) 298 ITR 349 (RAJ) WHEREIN IT WAS HELD THE TRIBUNAL HAS FOUND AS A FACT THAT THE ASSESSEE WAS RECEIVING MONEY FROM THE CUSTOMERS AGAINST WHICH DELIVERY OF VEHICLES WA S MADE SUCH CASH DEPOSITS ARE SELF EXPLANATORY AND WOULD NOT ATTRA CT S. 68 THEREFORE, NO ADDITION COULD BE MADE. THE LD. CIT HAS NOT DOUB TED THE OWNERSHIP OF THE RESPECTIVE SHAREHOLDINGS BY THE THREE SHAREH OLDERS AND ALSO MUST HAVE BEEN CONSIDERED BY THE RESPECTIVE AO/S. THEREF ORE, IT CANNOT BE DOUBTED THAT THIS WAS UNDISCLOSED INCOME OF THE ASS ESSE COMPANY WHICH MIGHT HAVE BEEN INTRODUCED THROUGH BOGUS CREDITS SO THAT THE AO MUST HAVE MADE ENQUIRIES TO PROVE OTHERWISE OF WHAT WAS APPARENT ON THE FACE. THEREFORE, THE LEVEL OF THE PROOF REQUIRED IN A NORMAL CASE OF CASH CREDIT U/S 68 COULD NOT HAVE BEEN BLINDLY APPLIED A ND EXPECTED OF THE AO TO HAVE THE SAME DEGREE OF PROOF IN THE PECULIAR FA CTS OF THIS CASE (THOUGH ASSESSE DID FURNISH THE REQUISITE DETAILS A ND THE EVIDENCES) AND THE AO ALSO DID WHATEVER IT WAS SUPPOSED IN THE LAW TO SATISFY THE REQUIREMENT OF S.68. NO DOUBT, A PROVISO WAS INSERT ED WHICH, REQUIRES THE AO THAT THE EXPLANATION OFFERED BY THE ASSESSE COMP ANY FOR THE AMOUNT CREDITED TOWARDS SHARE APPLICATION MONEY, PREMIUM E TC. SHALL BE DEEMED ITA 09/JP/2021_ ANNU AGROTECH P LTD. VS PR.CIT 38 NOT SATISFACTORY UNLESS THE SHAREHOLDER DOES NOT OF FER EXPLANATION ON THE NATURE AND THE SOURCE OF THE SUM CREDITED AND SUCH EXPLANATION IN THE OPINION OF THE AO IS NOT FOUND SATISFACTORY. IN THE PECULIAR FACTS OF THIS CASE, THE AO WAS NOT SUPPOSED TO DEEM THE EXPLANATI ON OFFERED BY THE ASSESSE AS UNSATISFACTORY BECAUSE THE ASSESSE HAD E XPLAINED THE NATURE AND THE SOURCE TO THE SATISFACTION OF THE AO AND TH ERE WAS NO EVIDENCE, INFORMATION OR ANYTHING ELSE INDICATING THAT MORE E NQUIRIES WAS WARRANTED. HENCE, THE PRINCIPLE PROPOUNDED BY THE H ONBLE RAJASTHAN HIGH COURT IN THE CASE OF SMT. HARSHILA CHORDIYA (SUPRA) STILL HOLDS GOODS INASMUCH AS THE PROVISO BROADLY STATES WHAT S . 68 STATES. IN FACT, FIRST PROVISO WAS INSERTED TO ANNUL THE ARGUMENT TH AT RECEIPTS TOWARDS SHARE ALLOTMENT, PREMIUM ETC. ARE AS OF CAPITAL NAT URE TO AVOID THE APPLICATION OF S. 68 W.R.T SUCH RECEIPTS. THEREFORE , THE RATIO LAID AS ABOVE HELD GOOD IN PRESENT CASE ALSO AND THIS LAW OF LAND HAVING BEEN AVAILABLE ON THE DATE OF THE PASSING OF THE ASSESSMENT ORDER DATED 16.11.2018, COULD NOT HAVE BEEN IGNORED BY THE AO. 15. WE OBSERVED THAT IT WAS NOT THE CASE OF CIT THA T THERE WAS A COMPLETE/TOTAL LACK OF INQUIRY. HE HIMSELF ADMITS I N THE IMPUGNED ORDER THAT THE AO DID MAKE ENQUIRY ON BOTH THE ISSUES. TH E LAW IS WELL SETTLED THAT THE ASSESSMENT ORDER CANNOT BE HELD TO BE ERRO NEOUS SIMPLY ON THE ALLEGATION OF INADEQUATE ENQUIRY. UNLESS THERE IS A N ESTABLISHED CASE OF ITA 09/JP/2021_ ANNU AGROTECH P LTD. VS PR.CIT 39 TOTAL LACK OF ENQUIRY. IN THIS REGARD, WE DRAW STRE NGTH FROM THE DECISION OF THE HONBLE DELHI HIGH COURT IN THE CASE OF CIT VS. SUNBEAM AUTO LTD. (2011) 332 ITR 167 (DEL) ), WHEREIN HONBLE DELHI HIGH COURT WAS CONSIDERING THE ASPECT, WHEN THERE IS NO PROPER OR FULL VERIFICATION, AND IT WAS HELD THAT: ONE HAS TO SEE FROM THE RECORD AS TO WHETHER THERE WAS APPLICATION OF MIND BEFORE ALLOWING THE EXPENDITURE IN QUESTION AS REVE NUE EXPENDITURE. LEARNED COUNSEL FOR THE ASSESSEE IS RIGHT IN HIS SUBMISSION THAT ONE HAS TO KEEP IN MIND THE DISTINCTION BETWEEN LACK OF INQUIRY AND INAD EQUATE INQUIRY. IF THERE WAS ANY INQUIRY, EVEN INADEQUATE THAT WOULD NOT BY ITSE LF GIVE OCCASION TO THE CIT TO PASS ORDERS UNDER SECTION 263 OF THE ACT, MERELY BE CAUSE HE HAS A DIFFERENT OPINION IN THE MATTER. IT IS ONLY IN CASES OF LACK OF INQUIRY THAT SUCH A COURSE OF ACTION WOULD BE OPEN. IN ANOTHER CASE OF NARAIN SINGLA V. PCIT [2015] 62 TAXMANN.COM 255 (CHANDIGARH - TRIB.) IT WAS HELD THAT WHEN AO WAS FULLY AWARE OF MATTER, HE HAD APPRAISED EVIDENCES FILED BY ASSESSE E AND THEN HAD FORMED A VIEW TO ACCEPT SAME, COMMISSIONER WAS UNJU STIFIED IN INVOKING JURISDICTION UNDER SECTION 263. WHETHER IF THERE WA S AN ENQUIRY, EVEN INADEQUATE, THAT WOULD NOT, BY ITSELF, GIVE OCCASIO N TO COMMISSIONER TO PASS ORDER U/S 263, MERELY BECAUSE HE HAS A DIFFERENT OPINION IN MATTER; IT IS ONLY IN CASE OF 'LACK OF INQUIRY' THAT SUCH A CAUSE OF ACTION CAN BE OPEN. IN THE CASE OF CIT VS. CHEMSWORTH PVT. LTD. (2020) 275 TAXMAN 408 (KAR) , IT WAS HELD THAT: REVISIONERRONEOUS AND PREJUDICIAL ORDERAO TAKING PLAUSIBLE VIEWAO COMPLETED THE ASSESSMENT WITHOUT CONSIDERIN G ITA 09/JP/2021_ ANNU AGROTECH P LTD. VS PR.CIT 40 EXPENDITURE WHICH WAS NOT ALLOWABLE UNDER S. 14ACI T HELD THAT NON-CONSIDERATION OF DISALLOWABLE EXPENDITURE UNDER S. 14A WAS ERRONEOUS AND IS PREJUDICIAL TO THE INTEREST OF THE REVENUENOT CORRECTCIT HAS HELD HAT THE ENQUIRY CONDUCTED BY T HE AO WAS INADEQUATE AND HAS ASSUMED THE REVISIONAL JURISDICT IONASSESSEE HAS FILED ALL THE DETAILS BEFORE THE AO AND AO HAS ACCEPTED THE CONTENTION OF THE ASSESSEE THAT NO EXPENDITURE WAS ATTRIBUTABLE TO THE EXEMPT INCOME DURING THE RELEVANT ASSESSMENT YE ARTHUS, WHILE RECORDING THE SAID FINDING, THE AO HAS TAKEN ONE OF THE PLAUSIBLE VIEWS IN ALLOWING THE CLAIM OF THE ASSESS EETHEREFORE, CIT COULD NOT HAVE SET ASIDE THE ORDER OF ASSESSMEN T MERELY ON THE GROUND OF INADEQUACY OF ENQUIRYORDER PASSED BY THE CIT WAS NOT SUSTAINABLE IN LAW HENCE, THE TRIBUNAL RIGHTLY SET ASIDE THE IMPUGNED ORDER OF THE CIT. 16. WE ALSO OBSERVED THAT THE SCOPE OF ENQUIRY IN T HE PRESENT CASE WAS LIMITED TO THE EXTENT OF THE ISSUES MADE A BASIS FO R SELECTION OF THE CASE. THE ADMITTED FACT WAS THAT THE CASE WAS SELECTED FO R LIMITED SCRUTINY SO AS TO EXAMINE WHETHER THE FUNDS RECEIVED IN THE FOR M OF SHARE PREMIUM ARE FROM DISCLOSED SOURCES AND HAVE BEEN CORRECTLY OFFERED TO TAX (AND NOT LARGE SHARE PREMIUM RECEIVED DURING THE YEAR VE RIFY APPLICABILITY OF SEC 56(2)(VIIB) OR ANY OTHER RELEVANT SECTION) AS P ER NOTICE ISSUED U/S 143(2) DATED 12.08.2017. IT IS ALSO A FACT AVAILABL E ON RECORD THAT LIMITED SCRUTINY WAS NOT CONVERTED TO FULL SCRUTINY NOR THE HIGHER AUTHORITIES DID SO. THUS, THE SCOPE OF EXAMINATION BY THE AO IN THI S LIMITED SCRUTINY WAS CONFINED: A) ONLY TO THE EXAMINATION OF THE FACT AS TO WHETH ER THE FUNDS RECEIVED IN THE FORM OF SHARE PREMIUM WERE FROM DISCLOSED SOURC ES OR NOT. EVIDENTLY, THERE WAS NO POINTED REFERENCE MADE TO S .68 THEREFORE, THE TECHNICAL REQUIREMENT OF S. 68 BEING ESTABLISHING T HE IDENTITY AND ITA 09/JP/2021_ ANNU AGROTECH P LTD. VS PR.CIT 41 CREDITWORTHINESS OF THE CREDITOR AND GENUINENESS OF THE TRANSACTION COULD NOT HAVE BEEN PRESUMED BY THE LD. PR. CIT AND CONSEQUENTLY, HE COULD NOT HAVE EXPECTED THE AO TO GET THE SAME PROV ED BY THE ASSESSE TO THE HILT. IN OTHER WORDS, THIS COULD NOT BE A GO OD BASIS FOR HOLDING THE SUBJECTED ASSESSMENT AS ERRONEOUS AND PREJUDICIAL T O THE INTEREST OF THE REVENUE. IT CANNOT BE DENIED THAT THE VERY REASON O F SELECTION WAS CERTAINLY ENQUIRED INTO BY THE AO IN AS MUCH AS THE FUNDS OF RS. 1.08 CR IN THE FORM OF SHARE PREMIUM WERE FOUND RECEIVED FR OM DISCLOSED SOURCES AS THEY WERE RECEIVED FROM THE REGULAR INCO ME TAX ASSESSES THROUGH BANKING CHANNELS. THAT BEING THE FACT, THER E WAS NO REASON, TO OFFER SUCH AMOUNT TO TAX. B) THERE APART, THE REASON FOR SELECTION DOES NOT SPEAK OF S. 56(2)(VIIB) AS WELL. HENCE, HERE ALSO THEREFORE, THE AO COULD NOT HAVE MADE ENQUIRIES ON THIS ASPECT. ALTHOUGH THE AO HAS DULY APPLIED MI ND ON THE ASPECT OF SHARE PREMIUM (AND OTHER RELATED ISSUES ON HIS OWN) BUT THIS FACT ITSELF COULD NOT HAVE AUTHORIZED THE CIT TO HAVE ENLARGED THE SCOPE OF LIMITED SCRUTINY FOR THE PURPOSES OF S. 263. MOREOVER, ONCE COMPLETE DETAILS WERE FILED BEFORE THE CIT, HE WAS SUPPOSED TO ADJUD ICATED THE ISSUES ON MERITS INSTEAD OF SENDING IT BACK TO THE AO. THE OB SERVATION AND ALLEGATION OF THE LD. CIT APPEARS TO BE FACTUALLY I NCORRECT. ON THE FIRST PAGE OF THE IMPUGNED ORDER ALSO, HE WRONGLY NARRATE D THE BASIS OF THE SELECTION OF THE CASE UNDER CASS UNDER LIMITED SCRU TINY FOR THE REASON LARGE SHARE PREMIUM RECEIVED DURING THE YEAR (VERIF Y APPLICABILITY OF S. 56(2)(VIIB) OR ANY OTHER RELEVANT SECTION. IT HAS N OT KNOWN WHERE FROM THE LD. CIT HAS ADAPTED THIS REASON OF SELECTION. T HEREFORE, ON THE FACE OF THE RECORD, NO FAULT COULD BE FIND IN THE SUBJEC TED ASSESSMENT ORDER ON THIS ASPECT. THUS, ON THIS ASPECT ALSO THE AO CO ULD NOT HAVE PROCEEDED TO EXAMINE THE APPLICATION OF S. 56(2)(VI IB) AND S. 263 COULD NOT HAVE BEEN INVOKED. WE DRAW STRENGTH FROM THE DECISION IN THE CASE OF MAHENDRA SINGH DHANKAR (HUF) VS. ACIT, (2021) 35 NYPTTJ 458 (JP ) WHEREIN IT WAS HELD THAT: REVISIONERRONEOUS AND PREJUDICIAL ORDERLIMITED S CRUTINY ASSESSMENTCASE OF THE ASSESSEE WAS SELECTED FOR LIMITED SCRUTINY U NDER CASS ON ACCOUNT OF MISMATCH OF SALES TURNOVER AS REPORTED IN AUDIT REP ORT, ITR, AIR AND CIB DATA AO ISSUED NOTICE UNDER S. 143(2) AND ENQUIRED ABOUT THE ISSUES UNDER ITA 09/JP/2021_ ANNU AGROTECH P LTD. VS PR.CIT 42 CONSIDERATIONBEING SATISFIED, THE AO COMPLETED THE ASSESSMENT UNDER S. 143(3) WITHOUT ANY ADVERSE FINDING REGARDING THE IS SUES FOR WHICH THE MATTER WAS SELECTED FOR LIMITED SCRUTINYSCOPE OF ENQUIRY IN CASE OF LIMITED SCRUTINY IS LIMITED TO THE EXTENT OF THE ISSUES FOR WHICH CASE IS SELECTED FOR SCRUTINY UNDER CASSHOWEVER, IN CASE DURING THE ASSESSMENT PROCEED INGS THE AO IS OF THE VIEW THAT SUBSTANTIAL VERIFICATION OF OTHER ISSUE I S ALSO REQUIRED, THEN THE CASE MAY BE TAKEN UP FOR COMPREHENSIVE SCRUTINY WITH THE APPROVAL OF THE PRINCIPAL CIT/DIRECTOR OF IT CONCERNEDWITHOUT FOLLOWING SAID PROCEDURE AND NECESSARY APPROVAL OF THE COMPETENT AUTHORITY, CONDUCTING AN ENQUIRY ON THE ISSUE WHICH IS OUTSIDE THE LIMITED SCRUTINY WOULD BE BEYOND THE JURISDICTION OF THE AO THEREFORE, WHERE THE MATTER IS SELECTED FOR LIMITED SCRUTINY, REVISIONAL JURISDICTION CANNOT BE EXERCISED FOR BROADENING THE SCOPE OF JURISDICTION THAT WAS ORIGINALLY VESTED WITH THE AO WHILE FRAMING THE ASSESSMENTFOR THE PURPOSES OF CONVERTING LIMITED SCRUTINY TO COMPLETE SCRUTINY, WHAT IS RELEVANT IS THAT THERE MUST BE SOME CREDIBLE MATERIAL OR INFORM ATION ON FACE OF THE RECORD INDICATING THAT THERE IS POSSIBILITY OF UNDERASSESS MENT OF INCOME IF THE CASE IS NOT EXAMINED UNDER 'COMPLETE SCRUTINY'IN THE INSTA NT CASE, THERE WAS NO TANGIBLE MATERIAL OR INFORMATION AVAILABLE DURING T HE COURSE OF ASSESSMENT PROCEEDINGS BASIS WHICH REASONABLE BELIEF CAN BE FO RMED OF ESCAPEMENT OR UNDERASSESSMENT OF INCOME WHICH COULD HAVE LED THE AO TO SEEK PERMISSION TO CONVERT LIMITED SCRUTINY INTO COMPLETE SCRUTINYISS UE OF VALUATION OF CLOSING WORK-IN-PROGRESS AS WELL AS MATTER RELATING TO AGRI CULTURE INCOME, WHICH ARE HELD BY THE PRINCIPAL CIT AS MATTERS NOT EXAMINED B Y THE AO, ARE MATTERS WHICH ARE NOT PART OF THE REASONS FOR WHICH THE CASE WAS SELECTED FOR LIMITED SCRUTINYAS FAR AS MATTERS FOR WHICH CASE WAS SELEC TED FOR LIMITED SCRUTINY IN TERMS OF MISMATCH OF SALES TURNOVER IS CONCERNED TH E PRINCIPAL CIT HAS NOT RECORDED ANY ADVERSE FINDINGS IN TERMS OF LACK OF E NQUIRY OR INADEQUATE ENQUIRY ON PART OF THE AOTHEREFORE, THE ORDER PASSED BY TH E PRINCIPAL CIT UNDER S. 263 IS SET ASIDE AND THE ORDER OF THE AO IS SUSTAINED. IN IN THE CASE OF CIT V/S SMT. PADMAVATHI (2020) 4 NYPCTR 682 (MAD) , IT WAS HELD THAT: REVISIONERRONEOUS AND PREJUDICIAL ORDER LACK OF P ROPER ENQUIRYAO IN HIS LIMITED SCRUTINY, HAS VERIFIED THE SOURCE OF FUNDS, NOTED THE SALE CONSIDERATION PAID, THE EXPENSES INCURRED FOR STAMP DUTY AND OTHE R CHARGESSOURCE OF FUNDS WAS VERIFIED AND THE AO WAS SATISFIED WITH THE SAME PRINCIPAL CIT WHILE INVOKING HIS POWER UNDER S. 263, FAULTS THE AO ON T HE GROUND THAT HE DID NOT ITA 09/JP/2021_ ANNU AGROTECH P LTD. VS PR.CIT 43 MAKE PROPER ENQUIRYIT IS NOT CLEAR AS TO WHAT IN T HE OPINION OF THE PRINCIPAL CIT IS PROPER ENQUIRYFURTHER, MERELY BECAUSE THE GUIDELINE WAS HIGHER THAN THE SALE CONSIDERATION SHOWN IN THE DEED OF CONVEYA NCE, CANNOT BE THE SOLE REASON FOR HOLDING THAT THE ASSESSMENT IS ERRONEOUS AND PREJUDICIAL TO THE INTEREST OF REVENUE IN THE CASE OF SU-RAJ DIAMOND DEALERS (P) LTD. V/S PCIT ( 2020) 203 TTJ (MUMBAI) 137 , IT WAS HELD THAT: REVISIONERRONEOUS AND PREJUDICIAL ORDERLACK OF P ROPER ENQUIRY VIS-A-VIS CASE SELECTED FOR LIMITED SCRUTING UNDER CASSAS PE R CBDT INSTRUCTION NO. 20 OF 2015, DT. 29TH DEC., 2015, SCRUTINY IN CASES SELECT ED THROUGH CASS IS TO BE CONFINED ONLY TO THE SPECIFIC REASONS/ISSUES FOR WH ICH THE CASE HAS BEEN PICKED UP FOR SCRUTINYHOWEVER, THE CASE MAY THEREAFTER BE TAKEN UP FOR COMPLETE SCRUTINY WITH THE APPROVAL OF THE ADMINISTRATIVE PR INCIPAL CIT/CIT, WHERE IT IS FELT THAT APART FROM THE CASS INFORMATION THERE IS POTEN TIAL ESCAPEMENT OF INCOME OF MORE THAN RS.10,00,000IN THIS CASE, IT IS NEITH ER A FACT NOR THE CASE OF THE REVENUE THAT THE CASE WAS TAKEN UP FOR COMPLETE SCR UTINY WITH THE APPROVAL OF THE ADMINISTRATIVE CITSINCE THE SCOPE OF THE ASSES SMENT FRAMED BY THE AO UNDER S.143(3) WAS CIRCUMSCRIBED BY THE LIMITED REA SONS FOR WHICH THE CASE OF THE ASSESSEE WAS SELECTED FOR SCRUTINY ASSESSMENT, HE WAS ABSOLUTELY DIVESTED OF HIS POWERS FROM TRAVERSING ON ISSUES WHICH DID NOT FALL WITHIN THE REALM OF THE SAID LIMITED PURPOSETHUS, NO INFIRMITY COULD BE AT TRIBUTED TO THE ASSESSMENT FRAMED BY THE AO ON THE GROUND THAT HE HAS FAILED T O DEAL WITH OTHER ISSUES WHICH DID NOT FALL WITHIN THE REALM OF THE LIMITED REASONS FOR WHICH THE CASE WAS SELECTED FOR SCRUTINY ASSESSMENTTHUS, THE ORDER PA SSED BY THE AO UNDER S. 143(3) CANNOT BE SAID TO BE ERRONEOUSTHEREFORE, OR DER PASSED BY THE PRINCIPAL CIT UNDER S. 263 IS QUASHED. IN THE CASE OF NAYEK PAPER CONVERTERS VS. ACIT (2005) 93 TTJ (CAL) 574 , IT WAS HELD THAT: REVISIONERRONEOUS ORDER AND/OR ORDER PREJUDICIAL TO REVENUELIMITED SCRUTINY ASSESSMENT BY AO UNDER S. 143(2)(1)EXERCI SE OF REVISIONAL JURISDICTION BY CIT DIRECTING AO TO MAKE COMPREHENSIVE SCRUTINY ASSESSMENT UNDER S. 143(2)(II)INVALIDIT IS THE EXCLUSIVE DISCRETION O F THE AO TO PROCEED UNDER S. 143(2)(I) OR 143(2)(II) IN A GIVEN CASEAO HAVING C HOSEN TO MAKE ASSESSMENT ITA 09/JP/2021_ ANNU AGROTECH P LTD. VS PR.CIT 44 UNDER S. 143(2)(I) AFTER OBTAINING APPROVAL OF ADDL . CIT AND MAKING PROPER ENQUIRIES, ORDER OF AO COULD NOT BE SAID TO BE ERRO NEOUS AND PREJUDICIAL TO THE INTEREST OF REVENUEFURTHER, TIME LIMIT FOR ISSUE O F NOTICE UNDER S. 143(2)(II) HAD ALSO EXPIREDSTILL FURTHER, ONLY MINISCULE CASE S WERE TO BE TAKEN UP FOR COMPREHENSIVE SCRUTINY UNDER S. 143(2)(I) AS PER GU IDELINES ISSUED BY CBDT 17. THE LD. PR.CIT ALSO ALLEGED THAT THE AO DID NOT MAKE ENQUIRIES AND VERIFICATION ON THE ISSUE OF LARGE SHARE PREMIUM RE CEIVED BY THE ASSESSE AND THE APPLICABILITY OF S.56(2)(VIIB) AND OTHER RE LEVANT SECTIONS EVEN THOUGH THIS WAS NOT THE REASON FOR SCRUTINY SELECTI ON. ALTERNATIVELY AND WITHOUT PREJUDICE TO ABOVE, EVEN OTHERWISE ON MERIT S, THERE HAS BEEN DUE AND PROPER APPLICATION OF MIND INASMUCH AS THE AO R AISED DIRECTLY RELEVANT QUERIES WHICH WERE DULY REPLIED BY THE ASS ESSE AS WELL. THE ASSESSE ALSO SUBMITTED THE COMPUTATION AS TO HOW TH E ASSESSE DERIVED THE AMOUNT OF THE PREMIUM WHICH WAS ALSO ADMITTED B Y THE LD. CIT IN PARA 3 PG 4 OF THE IMPUGNED ORDER. IN ADDITION, THE RETO, THE ASSESSE ALSO SUBMITTED A REPORT OF THE EXPERT DATED 10.10.2015 U NDER RULE 11UA WHICH ARE AT PAGE NOS. 46-58 OF THE PAPER BOOK WHIC H FULLY JUSTIFIED CHARGING PREMIUM @ RS 50 PER SHARE. HENCE, THE AO W AS FULLY JUSTIFIED IN NOT APPLYING IN S. 56(2)(VIIB). THERE APPEARS NO VA LID BASIS TO COMPUTE EXCESSIVE VALUE OF RS 1.73 PER SHARE WHICH IS NOT S UPPORTED BY ANY EXPERT REPORT BUT MERE SUSPICION. IN OTHER WORDS, I T WAS NOTHING BUT A SUBSTITUTION OF OPINION BY THE LD. PR.CIT. THEREFOR E, ON THIS ASPECT ALSO THE SUBJECTED ASSESSMENT ORDER COULD NOT BE COVERED U/S 263 AS IT WAS ITA 09/JP/2021_ ANNU AGROTECH P LTD. VS PR.CIT 45 NEITHER ERRONEOUS NOR PREJUDICIAL TO THE INTEREST O F THE REVENUE. HE ALSO GOT VALUATION DONE U/R 11UA BY EXPERT WHICH IS BIND ING UPON AO, AS HELD IN RAMESHWARAM STRONG GLASS PVT LTD VS. AO 195 TTJ465 (JP) . THE ALLEGATION OF THE LD. CIT THAT VARIOUS EVIDENTI AL DOCUMENTS WERE FURNISHED ITSELF GOES TO SHOW THAT THE AO DID NOT M AKE REQUISITE ENQUIRIES, IS NOT A GOOD BASIS TO INVOKE S.263 AND IS MERE SUSPICION AND SUBSTITUTION OF OPINION. MOREOVER, ONCE ALL THE DET AILS WERE MADE AVAILABLE BEFORE THE CIT, HE SHOULD NOT HAVE DECIDE D THE ISSUES INSTEAD OF SETTING ASIDE TO THE AO. WE DRAW STRENGTH FROM THE DECISION IN THE CASE OF GABRIEL INDIA LTD. [1993] 203 ITR 108 (BOM) , LAW ON THIS ASPECT WAS DISCUSSED IN THE FOLLOWING MANNER (PAGE 113): . . . FROM A RENDING OF SUB-SECTION (1) OF SECTION 263, IT IS CLEAR THAT THE POWER OF SUO MOTU REVISION CAN BE EXERCISED BY THE COMMISSIONER ONLY IF, ON EXAMINATION OF THE RECORDS OF ANY PROCEEDINGS UNDER THIS ACT, HE C ONSIDERS THAT ANY ORDER PASSED THEREIN BY THE INCOME-TAX OFFICER IS ERRONEOUS IN SO FAR AS IT IS PREJUDICIAL TO THE INTERESTS OF THE REVENUE . IT IS NOT AN ARBITRARY OR UNCHARTERED POWER, IT CAN BE EXERCISED ONLY ON FULF ILLMENT OF THE REQUIREMENTS LAID DOWN IN SUB-SECTION (1). THE CONS IDERATION OF THE COMMISSIONER AS TO WHETHER AN ORDER IS ERRONEOUS IN SO FAR AS IT IS PREJUDICIAL TO THE INTERESTS OF THE REVENUE, MUST B E BASED ON MATERIALS ON THE RECORD OF THE PROCEEDINGS CALLED FOR BY HIM. IF THERE ARE NO ITA 09/JP/2021_ ANNU AGROTECH P LTD. VS PR.CIT 46 MATERIALS ON RECORD ON THE BASIS OF WHICH IT CAN BE SAID THAT THE COMMISSIONER ACTING IN A REASONABLE MANNER COULD HA VE COME TO SUCH A CONCLUSION, THE VERY INITIATION OF PROCEEDINGS BY H IM WILL BE ILLEGAL AND WITHOUT JURISDICTION. THE COMMISSIONER CANNOT INITI ATE PROCEEDINGS WITH A VIEW TO STARTING FISHING AND ROVING ENQUIRIES IN MA TTERS OR ORDERS WHICH ARE ALREADY CONCLUDED. SUCH ACTION WILL BE AGAINST THE WELL-ACCEPTED POLICY OF LAW THAT THERE MUST BE A POINT OF FINALIT Y IN ALL LEGAL PROCEEDINGS, THAT STALE ISSUES SHOULD NOT BE REACTIVATED BEYOND A PARTICULAR STAGE AND THAT LAPSE OF TIME MUST INDUCE REPOSE IN AND SET AT REST JUDICIAL AND QUASI-JUDICIAL CONTROVERSIES AS IT MUST IN OTHER SP HERES OF HUMAN ACTIVITY. IN THE CASE OF ELDER IT SOLUTIONS (P.) LTD. VS CIT [2015] 59 TAXMANN.COM 232 (MUMBAI - TRIB.) , IT WAS HELD THAT: 18. IN THE CASE IN HAND, THERE IS NO DISPUTE THAT THE AO CALLED FOR FINANCIAL DETAILS OF THESE COMPANIES AND ALSO EXAMINE THE PAR TIES IN ORDER TO SATISFY HIMSELF ABOUT THE GENUINENESS OF THE TRANSACTION. T HEREFORE, ON THE BASIS OF THE RECORD AVAILABLE BEFORE HIM, THE AO ACCEPTED THE CL AIM OF THE ASSESSEE. THE COMMISSIONER HAS NOT FOUND ANY FAULT WITH THE DETAI LS AND RECORDS FILED BY THE ASSESSEE IN SUPPORT OF THE CLAIM BUT HAS CITED THE REASONS THAT THE AO HAS NOT CONDUCTED THE PROPER ENQUIRY. WHEN THE ENTIRE RECOR D WAS AVAILABLE WITH THE COMMISSIONER THEN HE OUGHT TO HAVE GIVEN A CONCLUDI NG FINDING THAT THE VIEW TAKEN BY THE AO IS CONTRARY TO THE LAW AS WELL AS F ACTS EMERGING FROM THE RECORDS. HOWEVER, THE COMMISSIONER HAS NOT GIVEN AN Y SUCH FINDING AND RESTORED THE MATTER TO THE RECORD OF THE AO WHICH I S NOT PERMISSIBLE AS PER THE PROVISIONS OF SECTION 263 WHEN THE AO HAS CONDUCTED THE ENQUIRY AND ALLOWED THE CLAIM OF THE ASSESSEE ON THE BASIS OF THE EXAMI NATION OF THE RECORD AS WELL AS THE PARTIES IN PERSON. WE FURTHER NOTE THAT THE ASSESSEE HAS ALSO FILED THE BANK STATEMENTS OF THESE COMPANIES SHOWING THE TRAN SACTION OF PAYMENT OF SHARE PREMIUM AS WELL AS LOANS TO THE ASSESSEE. THE TRANSACTIONS WERE ALSO ITA 09/JP/2021_ ANNU AGROTECH P LTD. VS PR.CIT 47 REFLECTED IN THE RETURN OF INCOME FILED BY THESE CO MPANIES, THEREFORE, IN ANY CASE IF THE DEPARTMENT HAS ANY DOUBT ABOUT THE GENUINENE SS OF ARRANGING THE FUNDS BY THESE SHARE APPLICANT COMPANIES, THE ENQUIRY AND INVESTIGATION SHOULD HAVE BEEN CONDUCTED IN THOSE CASES AS HELD BY THE HON'BL E DELHI HIGH COURT IN THE CASE OF LOVELY EXPORTS (P.) LTD. (SUPRA) WHICH HAS BEEN CONFIRMED BY THE HON'BLE SUPREME COURT BY DISMISSING THE SPECIAL LEAVE PETIT ION FILED BY THE DEPARTMENT. CONSIDERING THE TOTALITY OF FACTS AND CIRCUMSTANCES , FACTS OF THE PRESENT CASE AND AS WELL AS THE JUDICIAL PRONOUNCEMENTS, WE FOUND MERIT IN THE CONTENTION OF THE LD. AR, THEREFORE, WE QUASH THE O RDER PASSED BY THE LD. PR.CIT U/S 263 OF THE ACT. 18. ONCE, WE QUASH THE ORDER PASSED U/S 263 OF THE ACT, THEN IN THAT EVENTUALITY, THE OTHER GROUNDS RAISED BY THE ASSESS EE BECOME INFRUCTUOUS AND NEEDS NO ADJUDICATION. 19. IN THE RESULT, THIS APPEAL OF THE ASSESSEE IS A LLOWED. ORDER PRONOUNCED IN THE OPEN COURT ON 15 TH SEPTEMBER, 2021. SD/- SD/- FOE FLAG ;KNO LANHI XLKA (VIKRAM SINGH YADAV) (SANDEEP GOSAIN) YS[KK LNL;@ ACCOUNTANT MEMBER U;KF;D LNL;@ JUDICIAL MEMBER TK;IQJ@ JAIPUR FNUKAD@ DATED:- 15/09/2021 *RANJAN VKNS'K DH IZFRFYFI VXZSFKR @ COPY OF THE ORDER FORWARDED TO: 1. VIHYKFKHZ @ THE APPELLANT- ANNU AGROTECH PRIVATE LIMITED. ITA 09/JP/2021_ ANNU AGROTECH P LTD. VS PR.CIT 48 2. IZR;FKHZ @ THE RESPONDENT- THE PR.CIT, UDAIPUR. 3. VK;DJ VK;QDR @ CIT 4. VK;DJ VK;QDRVIHY @ THE CIT(A) 5. FOHKKXH; IZFRFUF/K] VK;DJ VIHYH; VF/KDJ.K] T;IQJ @ DR, ITAT, JAIPUR 6. XKMZ QKBZY @ GUARD FILE (ITA NO. 09/JP/2021) VKNS'KKUQLKJ @ BY ORDER, LGK;D IATHDKJ @ ASST. REGISTRAR