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Income Tax Appellate Tribunal, “RAIPUR” BENCH, RAIPUR
Before: SHRI PRADIP KUMAR KEDIA & SHRI N. K. CHOUDHRY
The captioned appeal has been filed at the instance of the assessee against the order of the Principal Commissioner of Income Tax, Bilaspur (‘PCIT’ in short), dated 31.03.2020 passed under s.263 of the Income Tax Act, 1961 (the Act) whereby the assessment order passed by the Assessing Officer (AO) dated 20.04.2017 under s. 143(3) of the Act concerning AY 2015-16 was sought to be set aside for reframing assessment in terms of supervisory directions.
(Shri Shaktidham Infraventure Pvt. Ltd. vs. PCIT) A.Y. 2015-16 - 2 -
2. As per the grounds of appeal, the assessee has sought to challenge the jurisdiction assumed by the PCIT under s.263 of the Act and as a corollary, sought to impugn the revisional order passed by the PCIT under s.263 of the Act.
3. The PCIT sought to revise the assessment order dated 20.04.2017 passed under s.143(3) of the Act by way of a show cause notice dated 26.02.2020 served upon the assessee, which is reproduced hereunder:
“Subject: Notice for Hearing in respect of Revision proceedings u/sec 263 of the THE INCOME TAX ACT, 1961 – Year 2015-16.
In this regard, a hearing in the matter is fixed on 05/03/2020 at 04:30 PM. You are requested to attend in person or through an authorised representative and file any additional information/documents in support of your application. Attendance is not necessary, .if you wish that the Revision application be decided on the basis of your written submission which may be furnished in this office, on or before the said date. You also have the option to file your submission from the e-filing portal using the link: incometaxindiaefiling.gov.in This is to inform you that the undersigned has examined your assessment records for the A.Y. 2015-16 and from the examination of the assessment order passed in your case u/s. 143(3} of the Act dated 20/04/2017, it is seen and observed that the assessment order passed by the AO is erroneous in so far as it is prejudicial to the interest of revenue. In the assessment order the AO has accepted the income returned by you without making proper enquiries and verification. Thus, the assessment order being erroneous in so far as it is prejudicial to the interest of revenue, it is proposed to take revisionary proceedings u/s. 263 of the Act in this case.
However, in the interest of natural justice and fair play I am giving you an opportunity to furnish your submission in writing alongwith documentary evidences if any with regard to following points. 2.1 The record reveals that during the year under consideration you have received share application money worth of Rs.
(Shri Shaktidham Infraventure Pvt. Ltd. vs. PCIT) A.Y. 2015-16 - 3 -
67,11,010/-. The analysis of documents on records shows the following details
S.No. Name Amount Source of share application money and other findings 01 Amritlal Kashyap 1061200 Cash deposit of Rs. 1,08,000/- and transfer amount of Rs. 9,41,224/- on 05.01.2015 and 21.01.2015 respectively. The bank account shows no other significant transactions. Further returned income is only Rs, 2,66,200/- and as per balance sheet he has made investment of Rs. 14,03,850/- only in this company and he has no other asset. 02 Baldev Rajpoot 271000 Cash deposit of Rs. 2,70,000/- on 15.01.2015. The bank account shows no other significant transactions. Returned income is only Rs. 2,68,300/- and as per balance sheet he has made investment of Rs. 14,10,150/- in this company only and he has no other asset. 03 B N Gupta 360000 Cash deposit of Rs. 3,60,000/- on 05.01.2015. The bank account shows no other significant transactions. Returned income is only Rs. 3,18,300/- and as per balance sheet he has made investment of Rs. 13,20,000/- in this company only and he has no other asset. 04 B N Gupta(HUF) 949910 Cash deposit of Rs. 1,90,000/- and transfer amount of Rs. 5,85,003/- and Rs. 1,73,907/- on 05.01,2015, 20.01.2015 and 21.01.2015 respectively. The bank account shows no other significant transactions.
(Shri Shaktidham Infraventure Pvt. Ltd. vs. PCIT) A.Y. 2015-16 - 4 -
Further returned income is only Rs. 2,46,300/- and as per balance sheet he has made investment of Rs. 14,35,750/- in this company only and he has no other asset. 05 K K Mishra 294100 Cash deposit of Rs. 1,50,000/- and Rs. 3,15,000/- on 21/04/2014 and 15/01/2015 and transfer amount of Rs. 1,50,000/- on 20/01/2015. The bank account shows no other significant transactions. Further returned income is only Rs. 3,16,200/- and as per balance sheet he has made investment of Rs. 14,79,500/- in this company only and he has no other asset. 06 KK Mishra (HUF) 524000 Cash deposit of Rs. 1,60,000/- on 21.04.2014. Cash deposit of Rs. 2,00,000/- and transfer amount of Rs. 1,60,000/- on 15.01,2015 and 20.01.2015 respectively. The bank account shows no other significant transactions. Further returned income is only Rs. 2,44,100/- and as per balance sheet he has made investment of Rs. 18,22,300/- in this company only and he has no other asset. 07 Madan Sahu 459000 Cash deposit of Rs. 65,000/- on 05.01.2015 and transfer amount of Rs. 3,92,000/- on 21.01.2015 and 25.02.2015 respectively. The bank account shows no other significant transactions. Further returned income is only Rs. 2,67,300/- and as per balance sheet he has made investment of Rs. 13,68,950/- in this (Shri Shaktidham Infraventure Pvt. Ltd. vs. PCIT) A.Y. 2015-16 - 5 - company only and he has no other asset. 08 Raj Bahadur Tiwari 302000 Cash deposit of Rs. 3,02,000/- on 05.01.2015. The bank account shows no other significant transactions. Further returned income is only Rs. 2,68,500/- and as per balance sheet he has made investment of Rs. 13,49,900/- in this company only and he has no other asset. 09 Ramkumar Kashyap 208000 Cash deposit of Rs. (HUF) 1,40,000/- and Rs. 2,08,000/- on 21.04.2014 and 05.01.2015 respectively. The bank account shows no other significant transactions. Further returned income is only Rs. 2,48,700/- and as per balance sheet he has made investment of Rs. 14,69,950/- in this company only and he has rib other asset. 10 Ramkumar Kashyap 570000 Cash deposit of Rs. 2,88,000/- and transfer amount of Rs. 1,40,000/- on 05.01.2015 and 20.01.2015 respectively. The bank account shows, no other significant transactions. Further returned income is only Rs. 2,68,500/- and as per balance sheet he has made investment of Rs. 14,27,500/- in this company only and he has no other asset. 11 Shashikant Mishra 526000 Cash deposit of Rs. 1,00,000/- on 21.04.2014. Cash deposit of Rs. 3,25,000/-and transfer amount of Rs. 1,00,000/- on 15.01.2015 and 20.01.2015 respectively. The bank account shows no other significant transactions. No return is on record. As per Balance (Shri Shaktidham Infraventure Pvt. Ltd. vs. PCIT) A.Y. 2015-16 - 6 - sheet he has made investment of Rs. 12,85,450/- in this company only and he has no other asset. 12 Sita Ram Yadav 819800 Cash deposit of Rs. 3,60,000/- and transfer amount of Rs. 6,08,039/- on 05.01.2015, 27.02.2015, 20.01.2015 and 03.03.2015 respectively. The bank account shows no other significant transactions. Further returned income is only Rs. 2,18,400/- As per balance sheet he has made investment of Rs. 13,62,150/- in this company only and he has no other asset. 13 Tarachand Kashyap 366000 Cash deposit of Rs. 2,80,000/- and transfer amount of Rs. 85,259/- on 05.01.2015, and 20.01.2015 respectively. The bank account shows no other significant transactions. Further returned income is only Rs. 2,68, 300/- and as per balance sheet he has made investment of Rs. 14,29,800/- in this company only arid he has no other asset. TOTAL 6711010
From the records it is seen that AO has not made proper examination/enquiry with respect to the source of share application money whereas these amount were got transferred from the account of share applicants either after depositing cash on the accounts or transferred in the bank account of share applicants. The AO has not properly examined/verified the creditworthiness of share applicants and genuineness of the transactions. The AO has not properly examined the return of income, balance sheet, computation of income and bank statements of the share applicants. The AO has not properly verified and examined this aspect of the case.
(Shri Shaktidham Infraventure Pvt. Ltd. vs. PCIT) A.Y. 2015-16 - 7 -
2.2 Record reveals that you have received total fund of Rs. 3,96,52,350/- by way of share capital { Rs. 86,29,290(share capital) + Rs. 3,10,23,060(Security premium)}. The AO has not verified and examined this aspect of the case.
2.3 Record reveals that there is inventory of land of Rs. 3,03,07,934/-. The AO has not verified and examined this aspect of the case.
2.4 P&L account reveals that there are purchases of Rs. 1,85,27,550/- against sale of goods of Rs. 1,77,15,556/- i.e. showing loss. The AO has not verified and examined this aspect of the case.
In view of the above lapses on the part of the AO and lack of examination and verification on the part of the AO in respect of the above issues and points, 1 find that the assessment order passed by the AO as on 20/04/2017 to be erroneous in so far as it is prejudicial to the interest of the revenue. Hence, it is proposed to revise the said order of assessment by virtue of the power vested in me u/s 263 of Income Tax Act 1961.
You are requested to submit your written explanation alongwith the documentary evidences if any as stated above on or before 05/03/2020 at 4.30 pm in my above mentioned office address. Kindly note that in this regard no further adjournment shall be granted and in the case of noncompliance from your side, it shall be presumed that you have no objection to the proposed action and the revisionary proceeding shall be finalized on the basis of material available on record.”
4. In response, the assessee strongly defended the action of the AO. The submissions made on behalf of the assessee as reproduced in the revisional order is also reproduced hereunder:
“4. In response to the notice issued, Shri Laxman Khelda, director of the company and Shri Vinod Mittal, CA and AR attended and submitted written submission which is placed on record. Case was discussed with him and he was heard.
The counsel of the assesses has submitted as under :- i. That the proposal for action u/s 263, assuming that the order passed by the learned assessing officer dated (Shri Shaktidham Infraventure Pvt. Ltd. vs. PCIT) A.Y. 2015-16 - 8 -
20/04/2017 is erroneous in so far as it is prejudicial to the interest of Revenue is objected and highly unjustified.
Submitted that provisions of section 263 are not applicable as there is no error which is prejudicial to the interest of revenue.
Prayed to drop the proceedings as below 2. All the issues in notice u/s 263 were enquired in depth? explained, AO applied mind and came to conclusion: All the issues (para No. 2.1 to 2.4) were explained during assessment proceedings. After in depth examination only, the ld Assessing officer came to conclusion ad the assessment order was passed accordingly. Submitted as below :- Para 2.1 - Receipt of Share application money The facts are on the record that the assessee has received Rs. 63,11,010/- (Total Receipt was out of which Rs. 4,00,000/- was repaid and again received back, Hence, net receipt was Rs. 63,11,010/-)
At the time of assessment proceedings assessee has submitted following documents of share applicants to discharge the burden casted upon the assessee with regard to identity, capacity of the share applicant, and genuineness of the transaction :-
Confirmation 2. Copy of acknowledgement of Return 3. Computation of total income. 4. Capital account and balance sheet. 5. Copy of Ban account. 6. Apart from that, learned Assessing Officer recorded statement on oath from all the share applicants. All the necessary information & explanation taken from them. Necessary enquiries made for identity, creditworthiness and genuineness of the transaction including source of share application money. During the assessment proceedings assessee has explained source of deposit in bank account of the share applicants. A list explaining those details is enclosed herewith for kind reference. Therefore, with regard to this issue also, the order of the ld Assessing Officer is not erroneous is so far as prejudicial to the interest of revenue. The list so submitted is reproduced as under :- S. Name Amount Source No. 01 Amritlal Kashyap 1061200 1,08,000 Cash from Own Past savings 9,41,224 Loan given to M/s S K Minerals in earlier (Shri Shaktidham Infraventure Pvt. Ltd. vs. PCIT) A.Y. 2015-16 - 9 -
years, received back
Bank Balance 11,976 02 Baldev Rajpoot 271000 2,70,000 Cash from Own Past savings 1,000/- Bank Balance
03 B N Gupta 36000 3,60,000 Cash from own past savings 04 B N Gupta(HUF) 949910 1,90,000 Cash from own past savings
5,85,003/- Loan given to Shri Laxman Kedia in earlier years, received back in earlier years, received back 1,73,907/- Loan given to Shri Krishna Kumar Mishra in earlier years, received back
05 K K Mishra 294100 2,94,100/ Cash from own past savings 06 KK Mishra (HUF) 364000 2,00,000 Cash from own past savings
1,60,000/- Share application money given to Shri Shaktidham Infraventures Pvt. Ltd. during the year, received back, Rs.1,60,000/- was deposited as cash on 21.04.2014 4,000/- Bank Balances
07 Madan Sahu 459000 65,000/- Cash from own past savings
1,25,000/- Loan given to Shri Nishant Khandelwal in earlier years, received back
2,67,000/- Loan given to Balaji Builders earlier years, received back
2000 Bank balance
08 Raj Bahadur Tiwari 302000 3,02,000/- Cash from own past savings (Shri Shaktidham Infraventure Pvt. Ltd. vs. PCIT) A.Y. 2015-16 - 10 -
09 Ramkumar Kashyap 208000 2,08,000/- Cash from own past savings (HUF)
10 Ramkumar Kashyap 430000 2,88,000/- Cash from own past savings 1,40,000/- Share application money given from Assessee’s HUF a/c to Shri Shaktidham Infraventure Pvt. Ltd. during the year, received back, in assessee’s a/c Rs.1,40,000/- was deposited as cash in assessee’s (HUF) a/c on 21.04.2014 21.04.2014
2000/- Bank Balance 11 Shashikant Mishra 526000 3,25,000/- Cash from own past savings
1,00,000/- Share application money given to Shri Shaktidham Infraventures Pvt. Ltd. during the year, received back, Rs.1,00,000/- was deposited as cash on 21.04.2014 1,000/- Bank balance
12 Sita Ram Yadav 819800 2,10,000/- Cash from own past savings
3,41,039 Loan given to L P Khedia in earlier years, received back
2,67,000/- Loan given to Balaji Builders earlier years, received back 1,761/- Bank balance
13 Tarachand Kashyap 366000 2,80,000/- Cash from own past savings 85,259/- Loan given to L P Khedia in earlier years, received back
741/- Bank balance (Shri Shaktidham Infraventure Pvt. Ltd. vs. PCIT) A.Y. 2015-16 - 11 -
2.2 Para 2.2 - Regarding Share Capital & Security Premium :- Details of share capital & Security Premium are as under :-
S. Particulars Opening Received Closing No. Balance FY 2015-16 Balance 1 Share Capital 72,27,480/- 14,01,800/- 86,29,290/- 2 Security 2,61,16.760/- 49,06,300/- 3,10,23,060/- Premium TOTAL 3,33,44,240/- 63,08,100/- 3,96,52,350/-
From above chart it is clear that during the year assessee has received fresh share application money which was duly verified and examined by the Ld Assessing Officer. Details are furnished at para 2.1 above. Therefore with regard to this issue also, the order of the Ld assessing officer is not erroneous in so far as it is prejudicial to the interest of the revenue.
Para 2.3 - Regarding inventory of land Submitted that there was inventory of land of Rs. 3,03,07,934/-, details of which are as under :- Opening balance as on 01-04-2014 - 2,95,77,814/- Add : Land purchased during the year - 7,30,120/- TOTAL - 3,03,07,934/- Submitted that at the time of assessment proceedings assessee has produced purchase deed and supporting documents of land purchase of Rs. 7,30,120/-. Ld assessing officer examined the document and source. Copy of purchase deed and copy of accounts are enclosed herewith for kind reference. Therefore with regard to this issue also, the order of the Ld assessing officer is not erroneous in so far as it is prejudicial to the interest of the revenue.
2.4 Para 2.4 - Regarding loss in Trading Account
Your honour observed that thee are purchases of Rs. 1,85,27,550/- against sale of goods of Rs. 1,77,15,556/- i.e. showing loss. But this is not correct, in fact assessee has earned gross profit of Rs. 3,87,067/-. Horizontal trading account is produced as under for ready reference :-
(Shri Shaktidham Infraventure Pvt. Ltd. vs. PCIT) A.Y. 2015-16 - 12 -
Particulars Amount Particulars Amount Opening Sales Stock Land 2,95,77,814/- Coal 1,77,15,556/- Coal 31,46,214/- 3,27,24,028/- Closing Stock Purchase Land 3,03,07,934/- Land 7,30,180/- Coal 36,15,155/- 3,39,23,089/- Coal 1,77,97,430/- 1,85,27,550/- 3,87,067/- Gross Profit 5,16,38,645/- 5,16,38,645/-
From the above it is clear that assessee has earned gross profit. Therefore with regard to this issue also, the order of the Ld assessing officer is not erroneous in so far as it is prejudicial to the interest of the revenue. In view of the above it is prayed to drop the proposal.”
The PCIT, however, did not accede to the submissions made on behalf of the assessee and observed that the AO has not made enquiries in relation to share application money which he should have, in the context of the facts of the case. The creditworthiness, bonafides and the genuineness of the share application money was not examined in proper perspective. The PCIT narrated the reasons for his dissatisfaction on the enquiries conducted on share application money as per para 5(a) of his order. As per para 6 of his order, however, the other point, namely, the reply of the assessee in (Shri Shaktidham Infraventure Pvt. Ltd. vs. PCIT) A.Y. 2015-16 - 13 - inventory of land and loss in trading account was accepted and dropped.
The PCIT thus alleged that the impugned order of AO is erroneous in so far as prejudicial to the interest of the Revenue on the grounds of inadequate enquiries with reference to Explanation (2) to Section 263 of the Act.
Aggrieved by the revisional order the PCIT, the assessee is in appeal before the Tribunal agitating the supervisory jurisdiction usurped by the Pr.CIT under s.263 of the Act.
We have carefully considered the rival submissions and perused the revisional order of the PCIT as well as the show cause notice issued for assumption of jurisdiction as well as the case laws cited. The assumption of jurisdiction under s.263 of the Act by the PCIT and revisional order passed as a sequel thereto seeking to set aside the completed assessment under s.143(3) of the Act is in controversy.
8.1 Supervisory jurisdiction vested under Section 263 of the Act enables the concerned Pr.CIT/CIT to review the records of any proceedings and order passed therein by the AO. It empowers the Revisional Commissioner concerned to call for and examine the records of another proceeding under the Act and if he considers that any order passed therein by the AO is erroneous in so far as it is prejudicial to the interest of the Revenue, then he may (after giving the assessee an opportunity of being heard and after making or causing to be made such inquiry as he deems necessary), pass such order thereon as the circumstances of the case justify, including the order enhancing or modifying the assessment or cancelling the assessment and directing afresh assessment. Thus, the revisional (Shri Shaktidham Infraventure Pvt. Ltd. vs. PCIT) A.Y. 2015-16 - 14 - powers conferred on the Pr.CIT/CIT under s.263 of the Act are of very wide amplitude with a view to address the revenue risks which are objectively justifiable.
8.2 In the facts and circumstances of the case, the substantive issue that emerges for adjudication is whether the Pr.CIT under the umbrella of revisonary powers is entitled to upset the finality of assessment proceedings completed before the AO where the AO has allegedly committed error in passing assessment order without proper verification of source of share application money received. Implicit in the question is the scope of powers of Revisional Commissioner in the event of alleged inadequacy of enquiry into various aspects of an issue.
8.3 On perusal of the show cause notice (SCN) dated 26.02.2020 issued by the Revisional Commissioner proposing to set aside the assessment order dated 20.04.2017 passed by AO under s.143(3) of the Act, we notice that the Pr.CIT is essentially dissatisfied with the degree of inquiry made in respect of issues raised therein.
8.4 The solitary premise to displace the completed assessment is inadequacy in enquiry on share application money. As vociferously pointed out on behalf of the assessee, the share application money to the tune of Rs.63,08,100/- were received during the year from certain parties. In the course of the assessment, the assessee has submitted several documents, such as, confirmation, acknowledgement of return, computation of income, capital account, balance sheet and copy of bank account etc. to support the identity, capacity of the share applicant and genuineness of transactions. The AO did not merely accept these evidences of receipts summarily but also issued summons to the share applicants in exercise of power under s.131 of the Act. The requisite information was (Shri Shaktidham Infraventure Pvt. Ltd. vs. PCIT) A.Y. 2015-16 - 15 - collected from the applicants and the statements of the applicants were recorded on oath. Thus, a deep enquiry was conducted into the source of share capital and share premium received during the year for which purpose, the case was selected for scrutiny through CASS. It was thus contended that the source of share capital money was fully traced by the AO to his satisfaction as contemplated under s.68 of the Act. It is the contention of the assessee that the PCIT is merely dissatisfied with the degree of enquiry in relation to share application money from his point of view which is not permissible under s.263 of the Act. It is further case of the assessee that PCIT himself has categorically agreed that it is not a case of complete lack of enquiry but a case of inadequate enquiry as perceived by him. It is thus contended that the assumption of jurisdiction by the PCIT under s.263 of the Act is without any legal foundation and consequently the revisional order is required to be quashed.
In short, as per the revisional order, the PCIT alleged that proper enquiry was not adequately made on the nature and source of share application money received by assessee.
On facts, we notice that it is demonstrated on behalf of the assessee with the help of submissions and evidences as placed before AO that requisite enquiries were made towards identity, capacity and genuineness of share application money received during the year. The issue was very much present to the mind of the AO. The relevant documents were also shown to have been filed in the assessment proceedings. We simultaneously notice a pertinent fact that the share applicants were summoned by the AO for this purpose and were examined on oath under s.131 of the Act to weigh the surrounding circumstances. On such facts, one cannot say that it is a case of no enquiry into the subject matter but it is rather a case of reasonable enquiry. The AO has not mechanically accepted (Shri Shaktidham Infraventure Pvt. Ltd. vs. PCIT) A.Y. 2015-16 - 16 - the assessee’s claim but has embarked upon an enquiry considered necessary to the wisdom of the AO albeit not matching from the idealistic point of view of the Revisional Commissioner. The records suggest that the AO cannot be blamed to have acted in a perfunctory manner merely because the expectations of Revisional Commissioner are purportedly not meet.
Adverting to the perspective on position of law, Section 68 of the Act provides that when any sum is found credited in the books of accounts of the assessee, he is expected to offer an explanation about its nature and source thereof to the satisfaction of the AO. Thus, the initial onus is indisputably on the assessee to establish there ingredients (a) identity (b) capacity of the creditor for advancement the money (prima facie creditworthiness) and (c) genuineness of transaction. The law however does not prescribe any quantitative test to find out whether the onus in a particular case has been discharged or not. It all depends on the facts and circumstances of each case. In some cases, the onus may be heavy whereas in others it may be nominal. There is nothing rigid about it as observed by the Hon’ble Supreme Court in the case of CIT v. Durga Prasad More, [1971] 82 ITR 540 (SC). Significantly, S. 68 of the Act uses the expression ‘may’ and thus enables the AO to exercise statutory discretion in a pragmatic and judicious manner, for or against, the assessee. The AO is thus not obliged to invoke the sphere of S.68 of the Act in all cases where the source is not proved to the last mile. This apart, it is well settled that while discharging the onus cast upon the assesse, it is not the stringent requirement of law that assessee needs also to prove the source of source i.e. money sourced by the lender to provide loan to the assessee. Once the assessee is able to establish the money has been received from the source belonging to third party, he cannot be (Shri Shaktidham Infraventure Pvt. Ltd. vs. PCIT) A.Y. 2015-16 - 17 - burdened with a further onus of establishing the source from which such third party has been able to obtain money. Useful reference in this regard can be made to the decision of Hon’ble Gujarat High Court in case of Rohini Builders (supra) and also Nemi Chand Kothari (supra); ITO vs. Diza Holdings (P) Ltd. 255 ITR 573 (Kerala) and so on.
In the background of the tenets of law relevant to the present case as digested above, we take a look at the facts emerging from the record. As noted, the assessee has established not only the source of loan obtained but has also adequately demonstrated before the AO the source of money in the hands of the share applicants. A small portion of cash deposited by lender doesn’t necessarily signify any collusion with assessee. The relevant facts were present before AO and were scrutinized. Thus, the burden of proof cast upon the assessee was broadly discharged. Needless to say, such onus can seldom be discharged to the hilt. In this background, a presumption can be safely drawn that the AO was armed with reasonable evidences to draw satisfaction with the explanation offered by the assessee towards receipt of share application money from various parties and consequently it can be said that the statutory discretion was exercised in favour of the assessee based on tell-tale evidences furnished by the assessee in this regard. The action of the AO thus cannot be wholly disregarded as untenable or implausible more so, where share applicants attended the enquiry and deposed on oath for the subscription made. The share applicants are assessed to tax and confirmed the subscription. On these facts, a question would arise as to whether it was incumbent upon the AO to disregard such evidences and hold the explanation to be unsatisfactory in terms of Section 68 of the Act or not. Having regard to the prerogative vested with the AO towards the (Shri Shaktidham Infraventure Pvt. Ltd. vs. PCIT) A.Y. 2015-16 - 18 - extent and manner of inquiry for drawing satisfaction, it is difficult to hold that the action of the AO is unintelligible. In our view, the AO has not committed any error in not chasing ‘will o the wisp’ in the absence of any brazen circumstances. In the light of aforesaid discussion, the basis of issuance of show cause notice under s.263 of the Act does not appear to be tenable in law in the peculiar set of facts. Consequently, the assumption of jurisdiction under s.263 of the Act will have to be regarded as without authority of law.
13 As noted, the share applicants have unequivocally confirmed the share subscription. In such facts, it will be difficult to discredit the share application money received per se and make additions in the realm of s.68 of the Act in the hands of the assessee in place of the share applicants where ‘source of source’ allegedly remains unproved in the opinion of the PCIT. Therefore purported inadequacy in inquiry as alleged, cannot be stated to be ‘erroneous’ per se in so far as assessee is concerned, even if, such inaction of AO towards fuller enquiry is branded as ‘prejudicial to the interest of Revenue’. Therefore, the mandatory twin conditions of Section 263 is also not found to be fulfilled when tested on the touchstone of taxability of share application moeny in the hands of assessee on the grounds of unproved source of source. Where the AO has exercised its quasi-judicial powers and arrived at a conclusion with reasonable application of mind, such action cannot be brushed aside as erroneous etc. simply because the Revisional Commissioner does not feel satisfied with extent of the inquiry and expects observance of higher standards in this regard. Where the assessee has furnished relevant material and offered explanation, the assessment cannot be ordinarily set aside for framing better assessment without any objective material on record adverse to the assessee. We thus concur with the plea on behalf of the assessee that S.263 (Shri Shaktidham Infraventure Pvt. Ltd. vs. PCIT) A.Y. 2015-16 - 19 - proceedings cannot be inflicted upon the assessee in these circumstances.
In support of such view, we also take note of the decision rendered by Hon’ble Bombay High Court in the case of CIT vs. Nirav Modi 390 ITR 292 (Bom.) where in somewhat similar circumstances, the decision of the Tribunal to cancel the order passed under s.263 of the Act was upheld. Thus, driven by the precedent, where the inquiry towards ‘source of source’ is not found to be the sacrosanct requirement of law, the alleged inadequacy in this respect should not be fastened on the assessee. Notwithstanding, any doubt in the capacity of the lender would ordinarily invite action against the lender who is shown to have received major component of money through banking channel from other source prior to its lending and is also a regular tax assessee. Therefore, the prejudice contemplated under s.263 of the Act, if any, is qua the lender and not the assessee.
While concluding, we are also alive to clause (a) of Explanation (2) to Section 263 of the Act inserted by Finance Act, 2015 w.e.f. 01.06.2015 which seeks to clarify that the order passed by the lower authorities to be erroneous in so far as prejudicial to the interest of the Revenue in the event of absence of inquiry ‘which should have been made’. With all the subjectivity inherently built in such phrase, the aforesaid clause only provides for situation where inquiries or verifications should be made by a reasonable and prudent officer in the context of the case. Such clause cannot be read to authorize or give unfettered powers to the Revisional Commissioner to revise each and every type of inadequacy in an order from a perfectionist point of view. Though the law is same for all, however, no two persons think alike and there could be variance in their analysis, understanding and application of law in (Shri Shaktidham Infraventure Pvt. Ltd. vs. PCIT) A.Y. 2015-16 - 20 - similar factual matrix. Assumption of jurisdiction owing to such variance would make every order under review as susceptible and thus exercise of review itself would be rendered arbitrary. The applicability of the clause is thus essentially contextual. As observed in the preceding paras, even if fuller inquiry with regard to source of source is omitted to be carried out, the provisions of Section 68 of the Act cannot be automatically fastened on the assessee. No objective material has been brought on record to implicate the assessee per se except possibility of further enquiry. Thus, seen from any angle, the assessment order passed under s.143(3) of the Act cannot be frustrated in the circumstances. Revisional order thus requires to be quashed and set aside.
In the result, the appeal of the assessee is allowed.
Order pronounced on 06/09/2021 by placing the result on the Notice Board as per Rule 34(5) of the Income Tax (Appellate Tribunal) Rule, 1963.
Sd/- Sd/- (N. K. CHOUDHRY) (PRADIP KUMAR KEDIA) JUDICIAL MEMBER ACCOUNTANT MEMBER Raipur: Dated 06/09/2021 True Copy S. K. SINHA आदेश क� ��त�ल�प अ�े�षत / Copy of Order Forwarded to:- 1. राज�व / Revenue 2. आवेदक / Assessee 3. संबं�धत आयकर आयु�त / Concerned CIT 4. आयकर आयु�त- अपील / CIT (A) 5. �वभागीय ��त�न�ध, आयकर अपील�य अ�धकरण, रायपुर / DR, ITAT, RAIPUR 6. गाड� फाइल / Guard file. By order,
Sr. Private Secretary ITAT, Raipur (on Tour)