M/S RANI SATI AGRO TECH PVT. LTD.,KOLKATA vs. ITO, WARD-12(3), KOLKATA

The assessee is in appeal before this Tribunal raising the following grounds:

Brief facts of the case are that the assessee is a private limited company engaged in the business of engineering goods. The return of income for Assessment Year 2012-13 was filed on 25/09/2012 declaring NIL income. Case selected for scrutiny and best judgment u/s 144 of the Act was framed on 14/03/2015 making addition for the unexplained cash credit u/s 68 of the Act at Rs.12,04,00,100/- and disallowance of preliminary expenses amounting to Rs.18,634/-. Subsequently, the ld. Pr. CIT invoked the provisions of Section 263 of the Act and framed order dt. 02/12/2015 holding that the assessment order dt. 14/03/2015 is erroneous and prejudicial to the interest of the Assessment Years: 2012-13 M/s. Rani Sati Agro Tech Pvt. Ltd. 4 revenue and directed the Assessing Officer to carry out proper examination of the books of account, purchase and sale, loans and advances, investment in bank account and also examined the source of share application, identity of the investors and its genuineness. In compliance to the directions given by the ld. Pr. CIT in the order u/s 263 of the Act dt. 02/12/2015, the ld. Assessing Officer carried out the assessment proceedings and also called for the details about the share application money and share premium amounting to Rs.11.10 Crores. The ld. Assessing Officer also called for the various other details in the notice issued u/s 142(1) of the Act. There was sufficient compliance to the said notices and information called for by the Assessing Officer. Summons were also issued u/s 131 of the Act and the Directors were produced and statements were recorded. Based on these detailed investigation and examining the details filed by the assessee, the ld. Assessing Officer concluded the assessment. Subsequently, the ld. Pr. CIT again called for the assessment records which was forming part of the record for the scrutiny proceedings carried out vide order dt. 17/05/2016. 4. 1. In the second round of revisionary proceedings, ld. Assessing Officer issued showcause notice u/s 263 of the Act on 16/01/2019 requiring the assessee to submit clarification/explanation with regard to the following issues:- “2. Subsequently, the assessment records of the assessee were called for & on the basis of verification of the material available on records, it was found that the order of assessment was erroneous so far as it is prejudicial to the interest of revenue on the following grounds:- Assessment Years: 2012-13 M/s. Rani Sati Agro Tech Pvt. Ltd. 5 (i) The A.O. passed the order without carrying out detailed investigation/verification/independent enquiry regarding identity, creditworthiness of the shareholders & also the genuineness of transactions relating to share capital that was intended to be carried out and merely accepted the submission of the assessee in this regard. (ii) That A.O has also failed to carryout detailed investigation of the shareholders on the very issue that how they decided to invest in such a company which was never known for its line of business and also they invested at huge premium without verifying the financial position. (iii) The A.O further failed to examine the rationale behind raising the said share premium and also did not verify the method adopted by assessee for determining such abnormally huge premium specially keeping in view that prima facie there was no material in the balance sheet of the assessee warranting/justifying such huge premium. (iv) The A.O failed to collect the relevant evidences in order to reach a logical conclusion regarding the genuineness of controlling interest. (v) The A.O failed to examine all the bank accounts for the entire period in the course of verification to find out the money trail of the share capital. (vi) The A.O failed to adequately trace out the money trail to ascertain the genuineness of source of fund invested by shareholders in the assessee company. (vii) On the whole the impugned order dated 17-05-2016 passed u/s 263/143(3) of the Income Tax Act, 1961 prima facie suffers from lack of independent and adequate enquiry on the aforesaid issues.” Assessment Years: 2012-13 M/s. Rani Sati Agro Tech Pvt. Ltd. 6

Though few opportunities were provided to the assessee but there was no satisfactory compliance as a result of which the ld. Pr. CIT concluded the revisionary proceedings referring to various judicial pronouncements thereby holding that the assessment proceedings carried out vide order dt. 28/10/2016, as erroneous and prejudicial to the interest of the revenue. Para 7 of the impugned order reads as follows:- “7. I have carefully considered and perused that the material available on record and found that the issues pointed out in the show cause needs verification as merely accepting submission without calling for logically relevant material/evidences in order to have an overview of totality of facts and circumstances, during the course of assessment proceedings the A.O. failed to examine the above referred issue rendering the assessment order erroneous on the ground of lack of enquiry. After having considered the position of law and facts and circumstances of the instant case, I am of the considered opinion that the assessment order passed by the A.O. is erroneous in so far as it is prejudicial to the interest of revenue in accordance with the Explanation 2 (c) below section 263 (1) of the Act on the ground of lack of enquiry. Accordingly, the assessment dated 28-10-2016 passed u/s 143(3)/263 is set aside de-novo on specific issue as outlined in above para 2 with a direction to Assessing Officer to cause adequate and effective enquiry. The A.O. is directed to provide reasonable opportunity to the assessee company to produce documents & evidences which it may choose to rely upon for substantiating its own claim. The AO is further directed to adjudicate the said issue de novo and pass a fresh assessment order in accordance with the relevant provisions of law.”

Aggrieved, the assessee is now in appeal before this Tribunal.

The ld. Counsel for the assessee submitted that so far as the directions given by the ld. Pr. CIT in the order u/s. 263 of the Act dt. 02/12/2015, there was sufficient compliance made by the Assessing Officer as well as the assessee. All necessary details were called for by Assessment Years: 2012-13 M/s. Rani Sati Agro Tech Pvt. Ltd. 7 issuance of notice u/s 142(1) of the Act and complete details were filed. The issue of share capital and share premium was extensively examined by the Assessing Officer. Complete financial documents, income tax return and bank statements were filed with regard to the alleged share applicants, the ld. Assessing Officer also issued summons u/s 131 of the Act to the Directors of the assessee company as well as investing companies to which sufficient compliance was made and the statements were recorded on 05/05/2016 on oath which forms part of the assessment records. It was also stated that notice u/s 133(6) of the Act were sent to the share applicants to which replies were received along with enclosures addressed to the Assessing Officer. It is also submitted that most of the share applicants have passed through the scrutiny proceedings u/s 144/143(3)/147 of the Act and, therefore, their identity and creditworthiness and genuineness of the transactions of share application money is proved beyond due date. It was also submitted that the ld. Assessing Officer has made detailed enquiry on all the issues and directions given in the order u/s 263 of the Act dt. 02/12/2015 and in the impugned order the ld. Pr. CIT is again referring to the same directions which have already been followed by the Assessing Officer and had made application of mind on the issues. Reference was also made to various documents which are available in the paper book and the index of the same is extracted below:- Assessment Years: 2012-13 M/s. Rani Sati Agro Tech Pvt. Ltd. 8 SI No. Particulars

Further reliance was placed on the following decisions:- SI No. Particulars

Reliance was further placed on the latest decision of the Tribunal in the case of M/s Pearl Tracom Pvt. Ltd. vs. PCIT-4, Kolkata in ITA No. 495/Kol/2022; Assessment Year 2012-13; order dt. 6th March, 2023. 8. On the other hand, the ld. D/R vehemently argued supporting the order of the ld. Pr. CIT further stating that the assessee did not appear before the ld. Pr. CIT in the second round of revisionary proceedings and also the financial statements of the alleged cash creditors in case that they have meagre income and appears to be jamakharchi and accommodation entry provider companies and since the ld. Assessing Officer has not conducted proper enquiry, finding in the impugned order may be confirmed.

We have heard rival contentions and perused the record placed before us and carefully gone through the decisions relied upon by the ld. Counsel for the assessee.

With the assistance of ld. representative, we have gone through the record. Section 263 has a direct bearing on the controversy, therefore, it is pertinent to take note of this section. It reads as under: "263(1) The Commissioner may call for and examine the record of any proceeding under this Act, and if he considers that any order passed therein by the Assessing Officer is erroneous in so far as it is prejudicial to the interest of the revenue, he may, after giving the assessee an opportunity of being heard Assessment Years: 2012-13 M/s. Rani Sati Agro Tech Pvt. Ltd. 10 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 an order enhancing or modifying the assessment, or cancelling the assessment and directing a fresh assessment. Explanation- For the removal of doubts, it is hereby declared that, for the purposes of this sub-section,- (a) an order passed on or before or after the 1st day of June, 1988 by the Assessing Officer shall include- (i) an order of assessment made by the Assistant Commissioner or Deputy Commissioner or the Income-tax Officer on the basis of the directions issued by the Joint Commissioner under section 144A; (ii) an order made by the Joint Commissioner in exercise of the powers or in the performance of the functions of an Assessing Officer conferred on, or assigned to, him under the orders or directions issued by the Board or by the Chief Commissioner or Director General or Commissioner authorized by the Board in this behalf under section 120; (b) record shall include and shall be deemed always to have included all records relating to any proceeding under this Act available at the time of examination by the Commissioner; (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 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. (2) No order shall be made under sub-section (1) after the expiry of two years from the end of the financial year in which the order sought to be revised was passed. (3) Notwithstanding anything contained in sub-section (2), an order in revision under this section may be passed at any time in the case of an order which has been passed in consequence of, or to give effect to, any finding or direction contained in an order of the Appellate Tribunal, National Tax Tribunal, the High Court or the Supreme Court. Explanation- In computing the period of limitation for the purposes of sub- section (2), the time taken in giving an opportunity to the assessee to be reheard under the proviso to section 129 and any period during which any proceeding under this section is stayed by an order or injunction of any court shall be excluded."

On a bare perusal of the sub section-1 would reveal that powers of revision granted by section 263 to the learned Commissioner have four compartments. In the first place, the learned Commissioner may call for and examine the records of any proceedings under this Act. Assessment Years: 2012-13 M/s. Rani Sati Agro Tech Pvt. Ltd. 11 For calling of the record and examination, the learned Commissioner was not required to show any reason. It is a part of his administrative control to call for the records and examine them. The second feature would come when he will judge an order passed by an Assessing Officer on culmination of any proceedings or during the pendency of those proceedings. On an analysis of the record and of the order passed by the Assessing Officer, he formed an opinion that such an order is erroneous in so far as it is prejudicial to the interests of the Revenue. By this stage the learned Commissioner was not required the assistance of the assessee. Thereafter the third stage would come. The learned Commissioner would issue a show cause notice pointing out the reasons for the formation of his belief that action u/s 263 is required on a particular order of the Assessing Officer. At this stage the opportunity to the assessee would be given. The learned Commissioner has to conduct an inquiry as he may deem fit. After hearing the assessee, he will pass the order. This is the 4th compartment of this section. The learned Commissioner may annul the order of the Assessing Officer. He may enhance the assessed income by modifying the order. He may set aside the order and direct the Assessing Officer to pass a fresh order. At this stage, before considering the multi-fold contentions of the ld. Representatives, we deem it pertinent to take note of the fundamental tests propounded in various judgments relevant for judging the action of the ld. Pr. CIT taken u/s 263. I.T.A. No. 85/Kol/2022 Assessment Years: 2012-13 M/s. Rani Sati Agro Tech Pvt. Ltd. 12

Hon'ble Supreme Court in the case of Malabar Industrial Co. Ltd. vs. CIT (2000) 243 ITR 83 (SC) has laid down following ratio with regard to provisions of section 263 of the Act: “There can be no doubt that the provision cannot be invoked to correct each and every type of mistake or error committed by the Assessing Officer; it is only when an order is erroneous that the section will be attracted. An incorrect assumption of facts or an incorrect application of law will satisfy the requirement of the order being erroneous. In the same category fall orders passed without applying the principles of natural justice or without application of mind. The phrase 'prejudicial to the interests of the revenue’ has to be read in conjunction with an erroneous order passed by the Assessing Officer. Every loss of revenue as a consequence of an order of the Assessing Officer cannot be treated as prejudicial to the interests of the revenue, for example, when an ITO adopted one of the courses permissible in law and it has resulted in loss of revenue; or where two views are possible and the ITO has taken one view with which the Commissioner does not agree, it cannot be treated as an erroneous order prejudicial to the interests of the revenue unless the view taken by the ITO is unsustainable in law. It has been held by this Court that where a sum not earned by a person is assessed as income in his hands on his so offering, the order passed by the Assessing Officer accepting the same as such will be erroneous and prejudicial to the interests of the revenue - Rampyari Devi Saraogi v. CIT [1968] 67 ITR 84 (SC) and in Smt. Tara Devi Aggarwal v. CIT [1973] 88 ITR 323 (SC)”. [Emphasis Supplied]

Hon’ble Apex Court in the case of CIT vs. Max India Limited as reported in 295 ITR 0282 has held that:

In the light of the provisions of section 263 of the Act and a settled position of law, powers u/s 263 of the Act can be exercised by the Pr. Commissioner/Commissioner on satisfaction of twin conditions, i.e., the assessment order should be erroneous and also prejudicial to the interest of the Revenue. By 'erroneous' is meant contrary to law. Thus, this power cannot be exercised unless the Commissioner is able to establish that the order of the Assessing Assessment Years: 2012-13 M/s. Rani Sati Agro Tech Pvt. Ltd. 14 Officer is erroneous and prejudicial to the interest of the Revenue. Thus, where there are two possible views and the Assessing Officer has taken one of the possible views, no action to exercise powers of revision can arise, nor can revisional power be exercised for directing a fuller enquiry to find out if the view taken is erroneous. This power of revision can be exercised only where no enquiry, as required under the law, is done. It is not open to enquire in case of inadequate inquiry. Our view is fortified by the judgment of Hon'ble High Court of Bombay in the case of CIT vs. Nirav Modi, [2016] 71 taxmann.com 272 (Bombay).

This view is further supported by the decision of the Hon'ble Gujarat High Court in the case of Shri Prakash Bhagchand Khatri in Tax Appeal No. 177 with Tax Appeal No.178 of 2016, wherein the Hon'ble Gujarat High Court was seized with the following substantial question of law: "Whether the Tribunal is right in law and on facts in upholding the order passed by the CIT under section 263 of the Act on merits and still storing the issue of allowability of deduction under section 54 of the Act to the file of Assessing Officer even though the working of allowability of deduction under section 54F is available in the order under section 263 which is not disputed by the assessee before ITAT."

We find that the Hon'ble Delhi High Court in the case of CIT vs. Anil Kumar reported in 335 ITR 83 has held that where it was discernible from record that the A.O has applied his mind to the issue in question, the ld. CIT cannot invoke section 263 of the Act merely because he has different opinion. Relevant observation of the High Court reads as under: Assessment Years: 2012-13 M/s. Rani Sati Agro Tech Pvt. Ltd. 15 "

We find the Hon'ble Delhi High Court in the case of Vikas Polymer reported in 341 ITR 537 has held as under: “We are thus of the opinion that the provisions of s. 263 of the Act, when read as a composite whole make it incumbent upon the CIT before exercising revisional powers to: (i) call for and examine the record, and (ii) give the assessee an opportunity of being heard and thereafter to make or cause to be made such enquiry as he deems necessary. It is only on fulfilment of these twin conditions that the CIT may pass an order exercising his power of revision. Minutely examined, the provisions of the section envisage that the CIT may call for the records and if he prima facie considers that any order passed therein by the AO is erroneous insofar as it is prejudicial to the interest of the Revenue, he may after giving the assessee an opportunity of being heard and after making or causing to be made such enquiry as he deems necessary, pass such order thereon as the circumstances of the case justify. The twin requirements of the section are manifestly for a purpose. Merely because the CIT considers on examination of the record that the order has been erroneously passed so as to prejudice the interest of the Revenue will not suffice. The assessee must be called, his explanation sought for and examined by the CIT and thereafter if the CIT still feels that the order is erroneous and prejudicial to the interest of the Revenue, the CIT may pass revisional orders. If, on the other hand, the CIT is satisfied, after hearing the assessee, that the orders are not erroneous and prejudicial to the interest of the Revenue, he may choose not to exercise his power of revision. This is for the reason that if a query is raised during the course of scrutiny by the AO, which was answered to the satisfaction of the AO, but neither the query nor the answer were reflected in the assessment order, this would not by itself lead to the conclusion that the order of the AO called for interference and revision. In the instant case, for example, the CIT has observed in the order passed by him that the assessee has not filed certain documents on the record at the time of assessment. Assuming it to be so, in our opinion, this does not justify the conclusion arrived at by the CIT that the AO had shirked his responsibility of examining and investigating the case. More so, in view of the fact that the assessee explained that the capital investment made by the partners, which had been called into question by the CIT was duly reflected in the respective assessments of the partners who were I.T. assessees and the unsecured loan taken from M/s Stutee Chit & Finance (P) Ltd. was duly reflected in the assessment order of the said chit fund which was also an assessee.”

Since in the instant case the A.O. after considering the various submissions made by the assessee from time to time and has taken a possible view, therefore, merely because the DIT does not agree with the opinion of the A.O., he cannot invoke the provisions of section 263 to substitute his own opinion. It has further been held in several decisions that when the A.O. has made enquiry to his satisfaction and it is not a case of no enquiry and the DIT/CIT wants that the case could have been investigated/ probed in a particular manner, he cannot Assessment Years: 2012-13 M/s. Rani Sati Agro Tech Pvt. Ltd. 16 assume juri iction u/s 263 of the Act. In view of the above discussion, we hold that the assumption of juri iction by the DIT u/s 263 of the Act is not in accordance with law. We, therefore, quash the same and grounds raised by the assessee are allowed."

The ITAT in the case of Mrs. Khatiza S. Oomerbhoy vs. ITO, Mumbai, 101 TTJ 1095, analyzed in detail various authoritative pronouncements including the decision of Hon'ble Supreme Court in the case of Malabar Industries 243 ITR 83 and has propounded the following broader principle to judge the action of CIT taken under section 263: “(i) The CIT must record satisfaction that the order of the AO is erroneous and prejudicial to the interest of the Revenue. Both the conditions must be fulfilled. (ii) Sec. 263 cannot be invoked to correct each and every type of mistake or error committed by the AO and it was only when an order is erroneous that the section will be attracted. (iii) An incorrect assumption of facts or an incorrect application of law will suffice the requirement of order being erroneous. (iv) If the order is passed without application of mind, such order will fall under the category of erroneous order. (v) Every loss of revenue cannot be treated as prejudicial to the interests of the Revenue and if the AO has adopted one of the courses permissible under law or where two views are possible and the AO has taken one view with which the CIT does not agree. If cannot be treated as an erroneous order, unless the view taken by the AO is unsustainable under law (vi) If while making the assessment, the AO examines the accounts, makes enquiries, applies his mind to the facts and circumstances of the case and determine the income, the CIT, while exercising his power under s 263 is not permitted to substitute his estimate of income in place of the income estimated by the AO. (vii) The AO exercises quasi-judicial power vested in his and if he exercises such power in accordance with law and arrive at a conclusion, such conclusion cannot be termed to be erroneous simply because the CIT does not fee stratified with the conclusion. (viii) The CIT, before exercising his juri iction under s. 263 must have material on record to arrive at a satisfaction. (ix) If the AO has made enquiries during the course of assessment proceedings on the relevant issues and the assessee has given detailed explanation by a letter in writing and the AO allows the claim on being satisfied with the explanation Assessment Years: 2012-13 M/s. Rani Sati Agro Tech Pvt. Ltd. 17 of the assessee, the decision of the AO cannot be held to be erroneous simply because in his order he does not make an elaborate discussion in that regard.”

Apart from above stated broader principles, one more principle needs to be added in view of the judgment of Hon’ble Delhi High Court in the case of ITO vs. D.G. Housing Projects Ltd. [2012] 343 ITR 329 (Delhi) that the ld. CIT has to examine and verify the issue himself and give a finding on merits and form an opinion on merits that the order passed by the AO is erroneous and prejudicial to the interest of the Revenue. Relevant extract is reproduced below: “In the present case, the findings recorded by the Tribunal are correct as the CIT has not gone into and has not given any reason for observing that the order passed by the Assessing Officer was erroneous. The finding recorded by the CIT is that "order passed by the Assessing Officer may be erroneous". The CIT had doubts about the valuation and sale consideration received but the CIT should have examined the said aspect himself and given a finding that the order passed by the Assessing Officer was erroneous. He came to the conclusion and finding that the Assessing Officer had examined the said aspect and accepted the respondent’s computation figures but he had reservations. The CIT in the order has recorded that the consideration receivable was examined by the Assessing Officer but was not properly examined and therefore the assessment order is "erroneous". The said finding will be correct, if the CIT had examined and verified the said transaction himself and given a finding on merits. As held above, a distinction must be drawn in the cases where the Assessing Officer does not conduct an enquiry; as lack of enquiry by itself renders the order being erroneous and prejudicial to the interest of the Revenue and cases where the Assessing Officer conducts enquiry but finding recorded is erroneous and which is also prejudicial to the interest of the Revenue. In latter cases, the CIT has to examine the order of the Assessing Officer on merits or the decision taken by the Assessing Officer on merits and then hold and form an opinion on merits that the order passed by the Assessing Officer is erroneous and prejudicial to the interest of the Revenue. In the second set of cases, CIT cannot direct the Assessing Officer to conduct further enquiry to verify and find out whether the order passed is erroneous or not.”

Now, examining the facts of the instant case in the light of the judicial precedents as discussed above in the preceding parts, we Assessment Years: 2012-13 M/s. Rani Sati Agro Tech Pvt. Ltd. 18 notice that during the financial year 2012-13, the assessee issued 1,11,000 equity shares at a face value of Rs.10/- and share premium of Rs.990/- per share and thus received Rs.11.10 Crores against the issue of equity shares. The assessee filed its return of income on 23/09/2012 and the return was scrutinized u/s 144 of the Act. These assessment records were called for by the ld. Pr. CIT in terms of the power available u/s 263 of the Act and noticed that in the balance sheet there was no closing stock. But in the balance sheet trade payables are appearing at Rs. 12,81,400/- which the Assessing Officer has not examined. The ld. Pr. CIT also referred to the transactions of receiving share capital and share premium of Rs.11.10 Crores and observed that the Assessing Officer has taken wrong figure of Rs.12,04,00,100/- instead of Rs.11,10,00,000/- and based on this observation, the ld. Pr. CIT has stated that the Assessing Officer has neither examined nor gathered any evidence from any source/witnesses. The ld. Pr. CIT accordingly held the assessment order dt. 14/03/2015 has erroneous and prejudicial to the interest of the revenue and gave the following directions to the Assessing Officer to carry out scrutiny proceedings in view of the directions given in the order u/s 263 of the Act:- “6 After going through the details available in assessment records and written submission of the assesse in respect of the 263 proceedings, it is seen that the copy of audited books of accounts, details of share subscriber, sales and purchase and details of sundry creditors was available on records, but A.O failed to examine these issues. Even in the assessment order, the A.O had taken a wrong figure of share capital raised by assessee company. The AO grossly ignored the examination/verification of share capital raised by assessee Assessment Years: 2012-13 M/s. Rani Sati Agro Tech Pvt. Ltd. 19 company, sources of capital, Sales and Purchase of assessee company and genuineness of transaction, which was the outmost requirement, before completion of assessment proceedings. This clearly shows that the assessment was completed without proper examination/verification. Tthe juri ictional High Court, in the case of CIT vs Maithan International, in ITA No-375 ITR 123 (Cal), 2015 held that 23. It is not the law that the Assessing Officer Occupying the position of an investigator and adjudicator can discharge his function by perfunctory or inadequate investigation. Such a course is bound to result in erroneous and prejudicial orders. Where the relevant enquiry was not undertaken, as in this case, the order is erroneous and prejudicial too and therefore, revisable. Investigation should always be faithful and fruitful...... Considering the facts and circumstances of case and submission of assessee, the order passed or 14.03.2015 stands erroneous in so far as prejudicial to the interest of revenue and therefore, the said order dated 20.03.2015 is Set Aside De novo with a direction to A.O to examine books of accounts and Ban accounts Purchase and sales of assessee company during the year. Further, A.O is also directed to examine the source of share application, identity of investors and should decide the issue as per law. The assessment proceedings may be initiated at the earliest and to be completed without waiting time barring date an sufficient opportunity of being heard to the assessee in order to meet natural justice, equity and fairness.”

In compliance to the directions given u/s 263 of the Act, vide order dt. 02/12/2015, the ld. Assessing Officer commenced the scrutiny proceedings and called for the following details from the assessee:- “Particulars of Accounts and/or documents required:

The ld. Assessing Officer also called for the following details of the share application money received during the year under the letter dt. 06/05/2016:- “1. From all your submission and replies received which is nothing new and the same bunch of documents re-submitted related to the share application money, thus after careful examination of these records you are here being show caused to explain in details with documents why these share applicants money received including premium during the year should not be treated as cash credit and added u/s 68 of the I T Act, 1961 to your taxable income.

Any other details and/or documents for the purposes of assessment.”

In reply, the assessee filed various details providing the information about the type of business carried out by the assessee, audited financial statements, auditors report note, NBFC auditors report from Reserve Bank, list of directors, details of trade payables, details of sundry debtors, list of purchases during the year. The assessee has also filed the details of allotment of equity shares to three share subscribers, namely, M/s. Chaturanga Commercial Pvt. Ltd., M/s. Eastern Synthetics Pvt. Ltd. and M/s. Oven Commercial Pvt. Ltd.. Date-wise details were filed regarding the information received from banking channels.

Further, we notice that the Assessing Officer in order to make independent enquiry with the share applicants, called information u/s 133(6) of the Act from all the three share applicants commonly calling therefrom the following informations:- “With reference to the above you are requested to furnish the following information for the Financial Year 2011-12 (A. Y. 2012-13) in respect of the transactions made by you with the above stated company :- Assessment Years: 2012-13 M/s. Rani Sati Agro Tech Pvt. Ltd. 22

In compliance to these notices, details were filed by the share applicants addressing them directly to the Assessing Officer providing the copies of share application forms, source of funds, copy of bank statement, copy of board resolution, copy of audited balance sheet etc.

After having conducted all these enquiries, in order to satisfy about the identity and creditworthiness of the share applicants and genuineness of the transactions, the ld. Assessing Officer moved a step forward and issued summons to the directors of the assessee company as well as investing companies to which necessary compliance was made and all the summoned persons appeared before the Assessing Officer and recorded under oath on 05/05/2016 and they form part of the assessment records. The specific observation of the Assessing Officer in the order dt. 17/05/2016. Relating the examination of share application money is reproduced below:- “Thus consequent to the order of Ld. Pr. Commissioner of Income Tax- 4, Kolkata, the case was taken for hearing and notice u/s 142(1) dated Assessment Years: 2012-13 M/s. Rani Sati Agro Tech Pvt. Ltd. 23 07/01/2016 was issued and served upon the assessee fixing date of hearing on 15/01/2016. A detailed submission as per requisition u/s 142(1) of the IT Act 1961 was made by the assessee on the date of hearing at 15/01/2016. Further from time to time the director of the assessee company Shri Nitesh Bhartiya appeared on 18.03.2016, 04.04.2016, 26.04.20.16 etc. and made submission, further notice u/s 133(6) of the IT Act 1961 were issued on the investing companies, their replies received were pursued and kept on record, summons u/s 131 was issued to the director of the assessee company on 04/05/2016 with a direction to produce the director of the investing companies and their statements were recorded on 05/05/2016 under oath and placed in the file, from the submission the source of the share applicants were duly cross checked with the bank statement. Finally, a show cause notice dated 08/05/2016 was issued and served upon the assesse. The Director of the assessee company Shri Satya Narayan Bhartia made written submissions which were discussed with him and kept in the record.”

From the above discussion, we find that the Assessing Officer has conducted extensive enquiry on the issues and directions mentioned u/s 263 of the Act which was given vide order dt. 02/12/2015 and further on perusal of the impugned order, we notice that all the issue which the ld. Pr. CIT has referred has already been addressed by the Assessing Officer in the detailed enquiry conducted in the course of assessment proceedings. It is neither a case of no enquiry nor a case of incomplete enquiry but it is a case where extensive enquiry has been conducted on which all the issues which have been raised in the impugned order and based on these detailed examination, ld. Assessing Officer came to a conclusion that the assessee has successfully satisfied, with documentary evidence as well as the evidence collected from the share applicants that the Assessment Years: 2012-13 M/s. Rani Sati Agro Tech Pvt. Ltd. 24 transactions of issuing shares at premium and received the share application money is a genuine transaction and the share applicants have successfully proved the identity and the creditworthiness to have invested in the equity shares capital of the assessee company. It is also noteworthy that the ld. Pr. CIT in the impugned order has not made any independent effort to bring out the fact which the Assessing Officer has not been able to lay his hand or has failed to call for in the course of assessment proceedings. It is well settled that when an issue on which detailed examination has been carried out by the Assessing Officer, before holding such assessment order as erroneous and so far as prejudicial to the interest of the revenue, the ld. Pr. CIT is required to conduct an enquiry and bring such information on record, failing which assumption of juri iction u/s 263 of the Act cannot be held to be justified.

The ld. Pr. CIT in its order, has relied on the judgment PCIT(Central)-1, Kolkata vs. NRA Iron & Steel Pvt. Ltd. (supra). We note that the Hon’ble Supreme Court in the said case has taken note of the observations made by the Supreme Court in the “the land mark case of Kale Khan Mohammed Hanif v. CIT [1963] 50 ITR 1 (SC) and Roshan Di Hatti v. CIT [1977] 107 ITR 938 (SC) laying down the proposition that the onus of proving the source of a sum of money found to have been received by an assessee, is on the assessee. Once the assessee has submitted the documents relating to identity, genuineness of the transaction, and credit-worthiness, then the AO must conduct an inquiry, and call for more details before invoking Section 68. If the Assessee is not able to provide a satisfactory explanation of the nature and source, of the investments made, it is open to the Revenue to hold that it is the income of the Assessment Years: 2012-13 M/s. Rani Sati Agro Tech Pvt. Ltd. 25 assessee, and there would be no further burden on the revenue to show that the income is from any particular source.” Thereafter the hon’ble Supreme court summed up the principles, which emerged after deliberating upon various case laws, as under :

The above judgment of Hon'ble Juri ictional High Court has recently been followed by this Tribunal in the case of Swasti Realinfra Pvt. Ltd. (supra) where also similar issue came for adjudication and the order u/s 263 of the Act has been quashed by this Tribunal observing as follows:

We note from the above findings of the AO that while giving effect to the directions of the Ld. Pr. CIT, AO issued notice u/s. 142(1) of the Act to the assessee which was duly complied with by filing necessary documents and informations. We note that the AO also issued notices u/s. 133(6) on 12.07.2016 to the parties from whom the funds were raised by the assessee and verified the source of investments, identity and genuineness. The said investor companies duly responded to the said notice and thereafter the AO recorded his satisfaction accepting the said investments in the hands of the assessee.

Since the facts of the case before us are materially same as involved in the cases decided above, we are therefore, inclined to quash the order u/s. 263 of the Act passed by the Ld. Pr. CIT second time by upholding the order passed in the first round by the AO in terms of the direction of the Ld. Pr. CIT. Accordingly, the appeal of the assessee is allowed.

In the result, the appeal of assessee allowed.”

We, therefore, respectfully following the judicial pronouncements stated herein above and also considering the fact that in a case where ld. AO conducted detailed enquiry and the assessee has filed complete documentary evidences to the satisfaction of ld. AO and coupled with these documentary evidences the investors of the alleged share applicant companies have appeared before ld. AO and recorded the statements on oath explaining that the investor companies had sufficient legitimate fund to justify the investment in equity share capital of the assessee company and based on these details and submissions and detailed enquiry ld. AO after making proper application of mind and taking a view permissible under the law was satisfied that the assessee has duly explained the alleged share capital and share premium and which thus, do not call for any addition u/s 68 of the Act.

Under these given circumstances, we are of the considered view that ld. Pr. CIT grossly erred in assuming the juri iction u/s 263 of the Act and also erred in holding the assessment order dated 30.12.2016 as erroneous and prejudicial to the interests of the Revenue. We, therefore quash the impugned order u/s 263 of the Act dated 12.03.2019 and restore the assessment order Assessment Years: 2012-13 M/s. Rani Sati Agro Tech Pvt. Ltd. 30 u/s 143(3) r.w.s. 263 of the Act dated 30.12.2016. Thus, all the grounds raised by the assessee are allowed.”

We, therefore, respectfully following the decision of this Tribunal in the case of M/s. Pearl Tracom Pvt. Ltd., as the facts involved in the instant case are identical, are of the considered view that the ld. Pr. CIT has grossly erred in assuming the juri iction u/s 263 of the Act and also erred in holding the assessment order dated 17/05/2016 as erroneous and prejudicial to the interests of the Revenue. We, therefore quash the impugned order u/s 263 of the Act dated 12.03.2019 and restore the assessment order u/s 143(3) r.w.s. 263 of the Act dated 17.05.2016. Thus, all the grounds raised by the assessee are allowed.

In the result, appeal of the assessee is allowed. Order pronounced in the Court on 19th June, 2023 at Kolkata. (RAJPAL YADAV) ACCOUNTANT MEMBER Kolkata, Dated 19/06/2023 *SC SrPs Assessment Years: 2012-13 M/s. Rani Sati Agro Tech Pvt. Ltd. 31

""यथ" / The Respondent 3. संबंिधत आयकर आयु" / Concerned Pr. CIT 4. आयकर आयु" अपील ( ) / The CIT(A)- 5. िवभागीय "ितिनिध ,आयकर अपीलीय अिधकरण, कोलकाता/DR,ITAT, Kolkata, 6. गाड" फाई/ Guard file.