Loading judgment…
No AI summary yet for this case.
Income Tax Appellate Tribunal, ‘’ D’’ BENCH, AHMEDABAD
Before: SHRI WASEEM AHMED
आयकर अपीलीय अिधकरण, अहमदाबाद �यायपीठ IN THE INCOME TAX APPELLATE TRIBUNAL, ‘’ D’’ BENCH, AHMEDABAD (CONDUCTED THROUGH VIRTUAL COURT AT AHMEDABAD) BEFORE SHRI WASEEM AHMED, ACCOUNTANT MEMBER And Ms MADHUMITA ROY, JUDICIAL MEMBER आयकर अपील सं./ITA No.53/AHD/2021 िनधा�रण वष�/Asstt. Year: 2010-2011 Ambe Tradecorp Private Limited, The P.C.I.T.(Central) Iscon House, Vs. Ahmedabad. B/h. Rembrandt Building, C.G. Road, Ahmedabad.
PAN: AABCJ8599F
(Applicant) (Respondent) Assessee by : Smt Nupur Shah, A.R Revenue by : Shri Mohd. Usman, CIT.D.R सुनवाई क� तारीख/Date of Hearing : 18/08/2021 घोषणा क� तारीख /Date of Pronouncement: 21/09/2021 आदेश/O R D E R PER WASEEM AHMED, ACCOUNTANT MEMBER:
The captioned appeal has been filed at the instance of the Assessee against the order of the Learned Principle Commissioner of Income Tax, Ahmedabad, dated 31/03/2021 arising in the matter of assessment order passed under s.263 of the Income Tax Act, 1961 (here-in-after referred to as "the Act") relevant to the Assessment Year 2010-2011.
The solitary issue raised by the assessee is that the learned Principal CIT erred in holding the assessment framed by the AO under section 143(3) read with section 147 of the Act as erroneous insofar prejudicial to the interest of Revenue.
ITA no.53/AHD/2021 Asstt. Year 2010-11 2
The facts in brief are that the assessee in the present case is a private limited company and engaged in the business of providing funds and finance facilities. In the present case the reassessment proceedings were initiated under section 147 of the Act by the AO on the basis of the information received from the investigation wing. The contents of the information received from the investigation wing, as alleged by the ld. PCIT, reads as under: i. The assessee has received share application money from the parties as detailed below: a. Rachna Finelease Pvt. Ltd. Rs. 42,74,50,000/- b. Capaxo Logistics Pvt. Ltd. Rs. 23,50,00,000/- (Arham Properties Pvt Ltd) c. Hit Flo Control Water Treatment Pvt. Ltd Rs. 17,79,50,000/- ii. The aforesaid companies have not filed their income tax returns for the year under consideration. iii. The persons who provided funds to the aforesaid companies have also not filed their income tax returns. 3.1 However, the assessment was framed under section 143(3) read with section 147 of the Act after making the addition of ₹ 39,05,50,000/- under section 68 of the Act being the amount received from M/s Rachna Finelease Pvt. Ltd. But there was no discussion/disallowance with respect to the amount credited from the remaining 2 companies.
3.2 Based on the above information, the learned Principal CIT was of the view that in the absence of returns filed by the companies as discussed above, the identity and creditworthiness of the companies were not established. Likewise, it was also not known whether these companies were maintaining any books of accounts. Therefore, creditworthiness of the parties namely M/s. Capaxo Logistics Pvt. Ltd. and M/s. Hit Flo Control Water Treatment Pvt. Ltd. were not proved as required under the provisions of section 68 of the Act.
ITA no.53/AHD/2021 Asstt. Year 2010-11 3
3.3 In view of the above the learned Principal CIT show caused the assessee vide letter dated 3rd March 2020 proposing to hold the order passed by the AO under section 143(3) read with section 147 of the Act, as erroneous insofar prejudicial to the interest of revenue.
3.4 The assessee in response to such show cause notice made a reply vide letter dated 17th March 2020 by stating that the amount received towards the share application money of ₹ 84,04,00,000/- was duly disclosed in the audited balance sheet under schedule 6 of the current liabilities.
3.5 Likewise, the assessee contended that the amount of share application money received from M/s Capaxo Logistics Pvt. Ltd for ₹23.50 crores has already been assessed in its (Capaxo Logistics Pvt.) hands in the assessment framed under section 143(3) read with section 147 of the Act. In the assessment under section 143(3) read with section 147 of the Act in the case of M/s Capaxo Logistics Pvt. Ltd, an addition of ₹ 12.50 crores was made by the AO which was deleted by the learned CIT (A) vide order dated 21st May 2019. As such the source of money/funds in the hands of M/s Capaxo Logistics Pvt. Ltd has already been explained by stating that the fund was received for Rs. 12.50 crores in the form share application money from the parties namely Smt. Hansaben Patel, Shri Ramesh Bhai Thakor and Vinod Sharma. Further, an amount of Rs. 10 crores was received from Shri Ramesh Bhai Thakor and Vinod Sharma representing the return of loan advanced in the earlier year.
3.6 The assessee further submitted that M/s Capaxo Logistics Pvt. Ltd has filed the necessary details during the assessment proceedings framed under section 143(3) read with section 147 of the Act. The details filed by M/s Capaxo Logistics Pvt. Ltd in support of the share application money invested in assessee company stand as under: Ledger Account of Ambe tradecorp Pvt Ltd in the books of Capaxo Logistics Pvt Ltd. evidencing receipt offunds from Capaxo Logistics Pvt. Ltd. for AY 2010-11.
ITA no.53/AHD/2021 Asstt. Year 2010-11 4
Contra Confirmation from the books of Ambe Tradecorp Pvt Ltd for AY 2010-11 Bank Statement of Capaxo Logistics Pvt. Ltd. as well as Ambe Tradecorp Pvt Ltd evidencing it to be a banking transaction for AY 2010-11 and 2011-12. Bank Book of Capaxo Logistics Pvt. Ltd. AY 2010-11 and 2011-12. Ledger A/c Ambe tradecorp Pvt Ltd in the books of Capaxo Logistics Pvt. Ltd. evidencing repayment of share application money in AY 2011-12. Contra Confirmation from the books of Ambe Tradecorp Pvt Ltd for AY 2011-12. Contra Confirmation from the books of Capaxo Logistics Pvt. Ltd. for AY 2011- 12. 3.7 It was also submitted that M/s Capaxo Logistics Pvt. also furnished the necessary details about the source of source in its hands during the assessment proceedings under section 143(3) read with section 147 of the Act. The necessary details justifying the source of source in the hands of M/s Capaxo logistics private Ltd stand as under:
• Ledger A/c of Ramesh Thakor and Vinod Sharma for AY 2009-10 evidencing loan given to them by Capaxo Logistics Pvt. Ltd for Rs. 70,00,00,000/- • Ledger A/c of Ramesh Tahkor and Vinod Sharma for AY 2010-11 evidencing repayment of loan and advances given in earlier year by Capaxo Logistics Pvt Ltd for Rs. 10,00,00,000/- • Ledger A/c of share application money received from Hansaben Patel, Vinod Sharma and Ramesh Thakor for Rs. 12,50,00,000/- for AY 2010-11 from the books of Capaxo Logistics Pvt. Ltd • Ledger A/c of AY 2011-12 showing share' application money returned to Hansaben Patel, Vinod Sharma and Ramesh Thakor for Rs. 12,50,00,000/-received in AY 2010-11 from the books of Capaxo Logistics Pvt. Ltd Further, the name and address of Hansaben Patel, Vinod Sharma and Ramesh Thakor were also submitted in reply dated 17.11.2017 and 14.12.2017 filed during the course of its assessment proceedings attached herewith as per Exhibit-V.
3.8 The assessee with respect to the share application money received from M/s HIT Flo Control Water Treatment Pvt. Ltd for ₹ 17,79,50,000/-, contended that it has received the money through the banking channel. Likewise, the source of funds in the hands of M/s HIT Flo Control Water Treatment Pvt. Ltd was duly explained. As such the impugned company has received money from Smt. Hansaben Patel who received a sum of ₹ 102.93 crores on the sale of properties. The fact i.e. sale of
ITA no.53/AHD/2021 Asstt. Year 2010-11 5
property by Smt. Hansaben Patel was subject to assessment framed under section 144 read with section 147 of the Act for the assessment year 2009-10 and 2010- 11. Accordingly it was contended by the assessee that it has provided the information about the source of source of the funds which was received by it in the form of share application money.
3.9 In view of the above the assessee contended that if any addition is made in its hands that it will lead to the double addition. It is because the amount of money received by the assessee has already been assessed in the hands of Smt. Hansaben Patel where from the fund was actually sourced. In other words all the companies who subscribed the shares in the assessee company, the majority of the funds were received from Smt. Hansaben Patel.
3.10 The assessee made further submission vide letter dated 19th March 2020 by furnishing the necessary details of the identity, genuineness of the transactions and creditworthiness of the parties with respect to the share application money received from M/s HIT Flo Control Water Treatment Pvt. Ltd. The assessee also submitted that the name of the company namely M/s HIT Flo Control Water Treatment Pvt. Ltd. has been struck off from the register maintained by ROC under easy exit scheme 2011 vide application dated 25th November 2011. But the company was very much in existence during the relevant time when it paid money for the share application to the assessee in the financial year 2009-10 corresponding to assessment year 2010-11.
3.11 However, the learned Principal CIT disagreed with the contention of the assessee and concluded that the assessment framed under section 143(3) read with section 147 of the Act is erroneous insofar prejudicial to the interest of revenue by observing as under:
Decision:- I have carefully and thoroughly gone through submission of the assessee. The contentions of the assessee stated in their reply are not accepted for the following reason;
ITA no.53/AHD/2021 Asstt. Year 2010-11 6
10.1 M/s Rachna Finlease Private Limited, Arham Properties Pvt. Ltd. and Hit Flo Control Water Treatment Pvt. Ltd. were non-filers. As per the report M/s Rachna Finlease Pvt. Ltd., Arham Properties Pvt. Ltd. and Hit Flo Control Water Treatment Pvt. Ltd. had paid huge amount to the assessee in F.Y.2009-10 relevant to A.Y.2010-11. The assessee had received Rs.8Q.04 crores as share application money from these three companies. Further, as per these three companies had received funds from the persons who had again not filed of Income. 10.2 As per the enquiry conducted by the investigation wing, it was clear that the identity and creditworthiness of above companies are not proved, as these companies had not filed their ITRs, other details of their books of accounts are also known. Therefore, these persons lack of creditworthiness to give huge sums as share application money to the assessee. 10.3 It has also come to my notice that during the proceedings before Hon'ble Settlement Commission, in the case of M/s J P Iscon & other group Companies the loans taken by assessee from the mentioned 3 entities are stated to be only book entry. The assessee company is also related/ associated with J P Iscon group. Therefore, indirectly it is conceded to be a bogus loan only and hence the genuineness of transactions are also not substantiated. This clearly shows that loans received by the assessee are bogus and AO failed to conduct enquiries in this case. The AO should have had also co-related thse loans with the declaration in Settlement Commission by JP Iscon Group.
In the light of facts and circumstances narrated above, I hold that the Assessing Officer has erred in making a proper assessment in this case. The assessment order is, therefore, erroneous in as much as it is prejudicial to the interest of Revenue. Hence, in exercise of Assessing Officer to pass a fresh assessment order in accordance with law and facts of the case after examining the particulars of the loans received on the lines as mentioned earlier and giving the assessee a reasonable opportunity of being heard.
Being aggrieved by the order of the learned principal CIT, the assessee is in appeal before us.
The learned AR before us filed a paper book running from pages 1 to 553 and submitted that all the details with respect to the share application money were available before the AO during the assessment proceedings. As such, the share application money was shown in the audited financial statements and the assessment was framed by the AO after due application of mind.
5.1 With respect to the share application money received from M/s Rachna Finelease Pvt. Ltd., the AO has made the addition in the assessment order which was subsequently deleted by the learned CIT (A). Thus the order of the AO got merged the order of the learned CIT (A). Therefore the same cannot be revised
ITA no.53/AHD/2021 Asstt. Year 2010-11 7
under section 263 of the Act with respect to share capital received from Rachna Finelease Pvt. Ltd.
5.2 Likewise, the learned AR submitted that there was the assessment framed in the case of Capaxo Logistics Pvt. Ltd. wherein an addition was made which was subsequently deleted by the learned CIT (A) in the case of Capaxo Logistics Pvt. Ltd. Accordingly, the source of money received by the assessee as share application money from Capaxo Logistics Pvt. Ltd. cannot be doubted.
On the other hand, the learned DR before us filed the written submissions dated 3 September 2021 and contended that there was no enquiry conducted by the AO during the assessment proceedings despite the information received from the investigation wing that the assessee has received bogus share application money.
6.1 It was also contended by the learned DR that in the group case of the assessee, it was duly admitted before the settlement commission to have received accommodation entry from the companies in dispute. The learned DR vehemently supported the order of the ld. PCIT.
We have heard the rival contentions of both the parties and perused the materials available on record. There was a search operation under section 132 of the Act dated 25th February 2016, carried out in case of group company of assessee i.e. JP Iscon Group. During the search, certain loose papers relating to the assessee were found from the residential premises of an individual who was subject to search namely Shri Sanjay Jesubhai Patel. From the seized papers, it was found that a sum Rs. 42,74,50,000/- was credited in the books of assessee from M/s Rachna Finelease Pvt. Ltd. Based on search, an information was received from the investigation wing Ahmedabad by the AO that such company has not filed the income tax return. Likewise as per the enquiry conducted by the investigation wing it was clear that the creditworthiness of the company i.e. M/s Rachna Finlease Pvt. Ltd. was not
ITA no.53/AHD/2021 Asstt. Year 2010-11 8
established. Accordingly, the reopening proceedings were initiated on the reasoning that the assessee has received a sum of ₹ 18,42,50,000/- from M/s Rachna Finlease Pvt. Ltd. towards share application money. The reasons recorded by the AO are placed on page 171 of the paper book. Accordingly the reassessment proceedings were framed under section 143(3) read with section 147 of the Act vide order dated 13th December 2017 after making any addition of Rs. 39,05,50,000/- to the total income of the assessee. It is necessary to clarify at this juncture that there was a mismatch in the amount recorded in the reasons for reopening the assessment viz a viz the addition made in the assessment proceedings under section 143(3) read with section 147 of the Act. However, the difference is not in dispute. In fact, during the assessment proceedings it was discovered that the amount received by the assessee from M/s Rachna Finlease Pvt. Ltd. stand at Rs. 39,05,50,000/- (Rs. 42,74,50,000 – Rs. 3,69,00,000 being opening balance) and therefore addition was made in the assessment proceedings.
7.1 Subsequently, the learned Principal CIT found that the assessee has also received share application money from the other companies namely M/s Capaxo Logistics Pvt. Ltd. (Arham Properties Pvt. Ltd.) and M/s Hit Flo Control Water Treatment Pvt. Ltd. amounting to Rs. 23,50,00,000/- and Rs. 17,79,50,000/- respectively. But there was no discussion /disallowance made qua such share application money in the assessment framed under section 143(3) read with section 147 of the Act dated 13th December 2017 despite the fact that these companies were also not filing their income tax return and therefore, the conditions imposed under section 68 of the Act were not complied with by the assessee. Accordingly, the ld. PCIT issued a notice under section 263 of the Act dated 3rd March 2020 proposing the order of the AO as erroneous and prejudicial to the interest of Revenue which was subsequently affirmed vide order dated 31-3-2021 for the reasons which have been elaborately discussed in the preceding paragraph.
ITA no.53/AHD/2021 Asstt. Year 2010-11 9
7.2 Now the controversy arises, whether the learned Principal CIT under section 263 of the Act can revise the order of the AO and direct him to make addition in the above facts and circumstances. The provisions of section 263 of the Act conferred power to Principal Chief Commissioner or Chief Commissioner or Principal Commissioner or Commissioner to set aside the order of the AO, if he/she based on records of the proceedings considers that the order of the AO is erroneous and causing prejudice to the Revenue.
7.3 An order of the AO can be described as the erroneous if the same has been passed on basis of wrong assumption of facts, incorrect application of law, passed without application of mind or without making enquiry. However, an order may be erroneous but it is not necessary that that such error causing any prejudice to the Revenue. Therefore, before invoking the revisionary provisions of section 263 the Act, the ld. PCIT has to satisfy that such error in the order of the AO is causing prejudice to revenue.
7.4 Going further it is necessary for commissioner to point out the specific error in the order of the AO. As such the commissioner cannot hold any order of the AO as erroneous in arbitrary manner. In other words, the finding of the ld. commissioner should be speaking one and not the vogue. In this regard we find support and guidance from the judgment of Hon’ble Madras High Court in case of Kumar Raja Ram vs. ITO reported in [2019] 110 taxmann.com 109 (Mad) where it was held as under: Section 263 does not visualize a case of substitution of the judgment of the Commissioner for that of the Income Tax Officer, who passed the order unless the decision is held to be erroneous. Merely because the Commissioner is not fully satisfied with the conclusion of the Income Tax Officer, the order cannot be turned to be erroneous. On a reading of the order passed under section 263 one can easily form an opinion that the order is based upon the interpretation which the Commissioner has given to the terms and conditions of the last will and testament of the assessee's father. Thus, it is evident that the Commissioner has made a roving enquiry and substituted his view to that of the view taken by the Assessing Officer who had done so after conducting an enquiry into the matter and after calling for all documents from the assessee, one of which is the last will and testament executed by the assessee's father. Therefore, this is not a case where the Commissioner could have invoked the power under section 263. [Para 6]
ITA no.53/AHD/2021 Asstt. Year 2010-11 10
7.5 We further draw support and guidance from the judgment of Hon’ble Delhi High Court in case of CIT vs. International Travel House Ltd reported in 194 taxman 324. The relevant portion of the judgment is reproduced as hereunder: While exercising power under section 263, the Commissioner has to be satisfied that the order is prejudicial to the interest of the revenue and there are materials available on record which require the Commissioner to satisfy him in a, prima facie, manner that the order is not only prejudicial to the interest of the revenue but is also erroneous in nature. In the absence of any of the factors being satisfied, he does not assume jurisdiction to initiate a suo motu power of revision. The exercise of such a power is dependent on the conditions precedent being satisfied. The Commissioner does not have unfettered power to initiate proceeding by revision, re-examining the matter and directing fresh enquiry on his own whim for change or having a different view. He has been conferred with a quasi-judicial power and the same is hedged with limitations and, therefore, it has to be exercised within the parameters of the provision. When the Commissioner is himself not able to form an opinion, he cannot direct another inquiry by the Assessing Officer under section 263. [Para 13] If the obtaining factual matrix was tested on the anvil of the aforesaid pronouncement of law, it was quite clear that the Commissioner had really made an effort to cause a routine inquiry with regard to the matter that had already been concluded. The Commissioner, it appeared, had thought that he had the authority to begin a fresh litigation because of the view entertained by him. The aforesaid inexhaustible approach was not permissible. He was required to arrive at a definite conclusion but he had not done so. In view of aforesaid analysis there was no reason to interfere with the order of the Tribunal and, therefore, same was to be approved. [Para 19]
7.6 However in the case on hand after going through the order of the learned Principal CIT under section 263 of the Act, it is not clear that whether the order of the AO under section 143(3) r.w.s. 147 is erroneous on account of non- application of mind or enquiry, or on account of wrong assumption of facts or law. As such the learned Principal CIT in the notice issued under section 263 used the words as detailed under: While passing order u/s 143(3) r.w.s. 147 of the Act dated 31.12.2017 the Assessing Officer has not made any discussion/disallowance on share application money received from M/s Capaxo Logistics Pvt. Ltd. (M/s Arham properties Pvt. Ltd.) to the tune of Rs.23,50,00,000/- and Rs.17,79,50,000/- received from M/s Hit Flo Control Water Treatment Pvt. Ltd, in view of the fact that these companies are not proved genuine as both were non-filers. From the details available on records, it is clear that this amount is also liable to be added as unexplained, in the absence of the identity proven, creditworthiness and genuineness of transaction."
7.7 Similarly, in the final finding the ld. PCIT in para 10.1 and 10.2 held that the parties who applied for share application are non-filer of return. Likewise, maintaining books of account are not known, thus the credit worthiness of these parties were not proven.
ITA no.53/AHD/2021 Asstt. Year 2010-11 11
7.8 Again in para 10.3 the learned PCIT held that in the case of one of the group company namely JP Iscon Pvt. Ltd, amount credited by these three parties in form of loan was held as book entry. Accordingly credit in the books of assessee was also held to be bogus.
7.9 However, the ld. PCIT in the concluding Paragraph has held that there was no proper assessment made. Thus he set aside the order giving direction to make fresh assessment after examining the particulars of ‘loan’.
7.10 From the above, it is not discernible whether the learned principal CIT was holding the order of the AO as erroneous on merit or on account of non-enquiry. Further he was not sure whether the amount credited in the books of assessee are share application money or loan as he has used the word as loan while setting aside to the issue to the file of the AO whereas the assessee has received the share application money. Likewise, the ld. CIT held that the parties who applied for the share application money are non-filers of return on the information received from investigation wing whereas we find that the assessee has filed the assessment orders and ld. CIT-A orders of two companies namely M/s. Rachna Finelease Pvt. Ltd. and Capaxo Logistics Pvt. But the ld. PCIT without considering these details have given incorrect finding that they were non-filers and books were not maintained. Such finding of the ld. PCIT leads us to draw an inference that the conclusion has been drawn by him (PCIT) in arbitrary manner which is unwanted under the provisions of law. In other words, the order of the ld. PCIT was not speaking order in the light of the judgments cited above.
7.11 However, for the completeness of the case, we proceed assuming that the order of the AO has been held as erroneous insofar prejudicial to the interest of Revenue on merit as well as on account of non-enquiries.
ITA no.53/AHD/2021 Asstt. Year 2010-11 12
7.12 First, we deal with the finding of the learned PCIT given by him on merit. It was alleged by the learned PCIT that the amount received by the assessee represents the accommodation entries from the companies as discussed above for the reason that such companies were not filing their income tax return. In this connection, we find that the finding of the learned principal CIT was not correct to some extent. It is for the reason that the company namely M/s Rachna Finelease Pvt Ltd and M/s Capaxo Logistics Pvt Ltd (Arham Properties Pvt Ltd.) have filed income tax return in response to the notice issued under section 148 of the Act and accordingly assessment was completed under section 147 read with section 143(3) of the Act. The respective assessment orders of M/s Capaxo Logistics Pvt Ltd and M/s Racna Finless Pvt Ltd are placed on pages 221 to 239 and 421 to 425 of paper book where huge additions made in the hands of these companies on account of unexplained credit under section 68 of the Act. However, subsequently the learned CIT (A) was pleased to delete the addition made by the AO in their hands. The copies of the orders of the learned CIT (A) are placed on pages 252 to 312 and 426 to 476 of the paper book. Therefore, the finding of the learned CIT (A) is not correct upto this extent.
7.13 Furthermore, once the source of fund in the hand of above companies were held as explained by ld. CIT(A) then amount received by the assessee from these companies cannot be held as unexplained under section 68 of the Act in the proceedings carried out under section 263 of the Act.
7.14 Nevertheless, the company namely M/s HIT Flo Control Water Treatment Pvt. Ltd. did not file the return for the year under consideration. However the assessee have submitted PAN, address, ledger confirmation, own and bank statement of M/s HIT Flo Control Water Treatment showing amount received through banking channel. All these document are placed at pages 376, 415, 479 to 482 and 416 to 420 of paper book. The assessee also claimed before the learned Principal CIT that M/s HIT Flo Control has received money from Smt. Hansaben Patel which can be verified from the bank statement of M/s Hit Flo Control. Smt. Hansaben Patel sold
ITA no.53/AHD/2021 Asstt. Year 2010-11 13
immovable property for Rs. 102.93 crores and paid due taxes in the assessment framed under section 147 r.w.s. 144 of the Act. Going through all these document it is established that identity, genuineness of transaction and credit worthiness/sources of fund has been established. Further the learned principal CIT have not pointed out any deficiency in these documentary evidences neither any contrary evidences brought by the learned DR before us. Thus the finding of the learned CIT that the creditworthiness of the parties were not proven was not based on the cogent reasons. Thus the finding of the learned PCIT appears to be arbitrary and non-speaking.
7.15 Further, it is also important to note that learned Principal CIT in his order has given categorical finding that the group company of the assessee being JP Iscon has admitted before the settlement commission that they have taken bogus entries in the form of loan from these companies. But the AO, during the assessment proceedings has not considered this fact. In this connection, we have gone through the order of settlement commission which is available on record. Going through para No. 12 of such order we find that the settlement commission has discussed the flow of fund transferred through cheque/ banking channel among Smt. Hansaben Patel, Asit S shah Group, assessee company, JP Iscon Pvt. Ltd., Shri Ramesh Thakur, Shri Vinod Sharma, M/s Rachna Finelease , M/s Capaxo logistics and M/s Hitflo Water Control. The amount of share application money received by the assessee company is part of this flow of chain. Finally, the settlement commission has given clear finding that there was no involvement of any cash in the entire flow of transactions with these companies and there is not any generation of undisclosed income. The relevant finding of the settlement commission reads as under: In the aforesaid rotation of Cheque funds there is no any involvement of cash rotation of the appellant company itself and any of group concerns and there is no any generation of undisclosed income which is required to be offered before the Hon’ble Settlement Commission.
7.16 It is also not out of the place to mention that the shares application money received by the assessee in the year under consideration was refunded in the subsequent year which can be verified from the details of the ledgers placed on
ITA no.53/AHD/2021 Asstt. Year 2010-11 14
pages 190 to 191, 363 to 364 and 477 to 478 of the paper book. The repayment of the loan amount by the assessee was duly accepted by the Revenue. In this regard, we find support and guidance from the judgment of Hon’ble Gujarat High Court in the case of the CIT Vs. Rohini builders reported in 256 ITR 360 wherein it was held as under: “The genuineness of the transaction is proved by the fact that the payment to the assessee as well as repayment of the loan by the assessee to the depositors is made by account payee cheques and the interest is also paid by the assessee to the creditors by account payee cheques.”
7.17 With respect to the amount of share application money received by the assessee from the company namely i.e. M/s Rachna Finelease Pvt. Ltd., we note that the AO in his order framed under section 143(3) read with section 147 of the Act dated 13th December 2017 has already made the addition to the total income of the assessee. Thus, in our considered view once an addition has already been made for any reason to the income of the assessee, there is no prejudice caused to the revenue.
7.18 Furthermore, we note that the order of the AO was challenged by the assessee before the learned CIT (A) who has given the relief to the assessee vide order dated 27th May 2019. Thus in other words, the order of the AO has merged with the order of the learned CIT (A). Therefore the same cannot be subject matter of revision under section 263 of the Act. For this purpose we refer to clause (c) of explanation 1 of section 263 of the Act which reads as under:
Explanation 1.—For the removal of doubts, it is hereby declared that, for the purposes of this sub- section,— (a) ******* (b)******* (c) where any order referred to in this sub-section and passed by the Assessing Officer had been the subject matter of any appeal filed on or before or after the 1st day of June, 1988, the powers of the Principal Commissioner or Commissioner under this sub-section shall extend and shall be deemed always to have extended to such matters as had not been considered and decided in such appeal.
ITA no.53/AHD/2021 Asstt. Year 2010-11 15
7.19 We also note that the Hon’ble Bombay High Court in the case of CIT vs. K. Sera Sera Productions Ltd reported in [2016] 71 taxmann.com 40 /[2015] 374 ITR 503 has held that the issues which have been considered by the learned CIT (A) cannot be subject matter of the revision under the provisions of the section 263 of the Act on the reasoning that the assessment framed by the AO got merged with the order of the learned CIT (A). The relevant portion of the Hon’ble court is reproduced hereunder: the claim of cost of production of film was a subject matter of appeal before the Commissioner (Appeals) and after consideration of remand report of the Assessing Officer he gave his findings. Therefore, the order of the Assessing Officer undisputedly had merged with the order of the first appellate authority as far as the claim of cost of production of the film is concerned. The attempt to reopen them cannot be saved as clause (c) of Explanation below sub-section (1) of section 263 had no application
7.20 Thus the entire basis of allegation on merit by the learned principal CIT that the credit worthiness of the parties i.e. share application money not proven does not hold well in view of above discussion. As the assessee was able to establish identity of the share applicants by furnishing PAN and their assessment orders and proving the genuineness of transaction by adducing bank statements and also explained the sources of fund in their hand which are placed on pages of the paper book as discussed above.
7.21 Moving further, the question also arises whether the assessment order framed under section 147 read with section 143(3) of the Act was passed by the AO without making the necessary enquiries and therefore the order passed by the AO is erroneous insofar prejudicial to the interest of revenue. In this regard we note that it is undisputed fact that the proceedings initiated under section 147 of the Act was limited to the extent of the amount of share application money received by the assessee from the company namely M/s Rachna Finlease Pvt. Ltd. As the reason to believe was recorded by the AO for concealment of income only with respect to the amount credit from M/s Rachna Finlease Pvt. Ltd., the amount of credit from other
ITA no.53/AHD/2021 Asstt. Year 2010-11 16
two companies i.e. M/s Capaxo Logistics and M/s Hitflo Water Control was not part of such proceedings. Accordingly the AO carried the necessary enquiries with respect to share application money received from M/s Rachna Finlease Pvt. Ltd. and made the addition under section 68 of the Act on such receipt. Now the question arise whether the learned Principle CIT can extend the area of examination under section 263 by revising the assessment order framed under section 147 r.w.s. 143(3). To our understanding the answer stands negative for the reason that proceeding under section 147 is limited to the extent of reason recorded. Though the provision section 147(1) authorizes AO to make addition with regard to any other issue if it comes to his/her notice during the proceeding. Here it is not the case. Hence the learned principal CIT cannot held the order under section 147 r.w.s. 143(3) for non-enquiry of share capital which was not the part of the proceeding. If he wanted to do so then he has to revise the order under section 143(1) of the Act as the case may be. In holding so we draw support and guidance from the judgment of Hon’ble Bombay High Court in the case of CIT vs. Lark Chemicals Ltd reported in 55 taxman.com 446 wherein it was held as under:
We have considered the rival submissions. It is not disputed that save and except the issue of non-genuine purchases all other issues dealt with by the Commissioner of Income- tax in the order dated March 30, 2009, were not a subject matter of the assessment order passed on June 28, 2006, under section 143(3)/147 of the Act. All the other issues on which the Commissioner of Income-tax is seeking to exercise the jurisdiction under section 263 of the Act were concluded by virtue of an intimation under section 143(1) of the Act which admittedly was done beyond a period of two years prior to the notice dated March 17, 2009, issued under section 263 of the Act. Section 263(2) of the Act provides that no order would be made in exercise of the jurisdiction under section 263(1) of the Act after the expiry of two years from the end of the financial year in which the order sought to be revised was passed. It is an admitted position that the Commissioner of Income-tax has not exercised the revisional jurisdiction in respect of the order/intimation passed section 143(1) of the Act within two years of it being passed. Therefore, exercise of jurisdiction on those issues under section 263 of the Act is time barred as held by this court in CIT v. Anderson Marine & Sons (P.) Ltd. [2004] 266 ITR 694/139 Taxman 16. Moreover, in view of the decision of the apex court in the matter of Alagendran Finance Ltd.'s case (supra) as well as our court in the matter of Ashoka Buildcon Ltd.'s case (supra) the jurisdiction under section 263 of the Act cannot be exercised on issues which were not subject matter of consideration while passing the order of reassessment under section 143(3)/147 of the Act but a part of an assessment done earlier under the Act
ITA no.53/AHD/2021 Asstt. Year 2010-11 17
7.22 In view of the above facts and after considering the details in totality, we set aside the finding of the learned principal CIT and restore the order of the AO. Hence the ground of appeal of the assessee is allowed.
In the result, the appeal filed by the assessee is allowed.
Order pronounced in the Court on 21/09/2021 at Ahmedabad.
Sd/- Sd/- (MADHUMITA ROY) (WASEEM AHMED) JUDICIAL MEMBER ACCOUNTANT MEMBER (True Copy) (True Copy) Ahmedabad; Dated 21/09/2021 Manish