M/S. PEARL TRACOM PVT. LTD.,KOLKATA vs. PCIT-4, KOLKATA, KOLKATA

आयकर अपीलीय अधिकरण कोलकाता 'बी' पीठ, कोलकाता में IN THE INCOME TAX APPELLATE TRIBUNAL KOLKATA ‘B’ BENCH, KOLKATA श्री राजपाल यादव, उपाध्यक्ष (कोलकाता क्षेत्र) एवं डॉ. मनीष बोरड, लेखा सदस्य के समक्ष Before SRI RAJPAL YADAV, VICE PRESIDENT & DR. MANISH BORAD, ACCOUNTANT MEMBER I.T.A. No.: 495/KOL/2022 Assessment Year: 2012-2013 M/s. Pearl Tracom Pvt. Ltd....………….......................Appellant [PAN: AABCP 9934 G] Vs. PCIT-4, Kolkata....................................................Respondent Appearances by: Sh. Siddharth Jhajharia, FCA, appeared on behalf of the Assessee. Sh. Sudipta Guha, CIT, (D/R), appeared on behalf of the Revenue. Date of concluding the hearing : February 7th, 2023 Date of pronouncing the order : March 6th, 2023 ORDER Per Manish Borad, Accountant Member: This appeal filed by the assessee pertaining to the Assessment Year (in short “AY”) 2012-2013 is directed against the order passed u/s 263 of the Income Tax Act, 1961 (in short the “Act”) by ld. Pr. Commissioner of Income-tax-4, Kolkata [in short

I.T.A. No.: 495/KOL/2022 Assessment Year: 2012-2013 M/s. Pearl Tracom Pvt. Ltd. ld. “PCIT”] dated 12.03.2019 which is arising out of the assessment order framed u/s 143(3) of the Act dated 20.03.2015. 2. Registry has informed that the appeal filed by the assessee is time barred by 1209 days. Condonation application has been filed by the assessee dated 31.08.2022 stating as follows: “We are in receipt of order u/s 263 dt. 12.3.2019 and the same has come to our knowledge only on 24.8.2022. Such order was never served on us nor a certified copy in the matter was provided despite our request and it was provided to us only on 24.8.2022 As soon as such order was brought to knowledge of the Management, the matter was forwarded by them to the tax consultant. Although such order (certified copy) has been received on 24.8.2022, as a matter of abundant precaution it is presumed that such order was /could have been served by 12.3.2019, the date of order as 12.3.2019 is being treated as date of service of order although certified copy has been provided only on 24.8.2022 (since the original order was never served on us). Hence the delay of 1206 days (i.e. including 60 days of appeal filing). Hence the appeal couldn’t be filed against the said order u/s 263 within time for filing the appeal i.e. by 12.5.2019 and is being filed now after delay of 1206 days due to reasonable cause only. Hence, the appeal has been prepared along with a petition for condonation of delay of 1206 days. Your goodselves may kindly appreciate that such delay was due to reasonable cause only. Further your goodselves may kindly appreciate that delay is only of 1206 days (from 12.5.2019) and hence your goodselves may kindly take a considerate view in the matter and the delay may kindly be condoned and the appeal may kindly be accepted. We require your goodself to kindly condone the delay in filing the appeal and accept the appeal as prayed for.” 2.1. Therefore, considering the condonation application and the reasons stated that the impugned order passed u/s 263 of the Act dated 12.03.2019 was served only on 24.08.2022 to the assessee and the delay in filing the appeal in time is for a reasonable cause. We find force in the reasons mentioned therein and are satisfied Page 2 of 49

I.T.A. No.: 495/KOL/2022 Assessment Year: 2012-2013 M/s. Pearl Tracom Pvt. Ltd. that the assessee was prevented for reasonable cause in filing the instant appeal within statutory time limit. We, therefore, condone the delay and admit the appeal for adjudication on merits. 3. The assessee is in appeal before this Tribunal raising the following grounds: “1. For that in view of the facts and in the circumstances, the Ld. PCIT was wholly unjustified in setting aside the order passed by the AO u/s 263/143(3) dt. 30.12.2016 holding the said order to be erroneous and prejudicial and in view of the facts and in the circumstances the impugned order of Ld. PCIT is liable to be quashed / cancelled / set aside and in view of the facts and in the circumstances it may be held accordingly. 2. Without prejudice to Ground No. 1 above, the impugned order having been passed without proper service of notice, the impugned order is an ex-parte order in nature, hence the impugned order is liable to be quashed/ cancelled/ set aside and in view of the facts and in the circumstances it may be held accordingly. 3. Without prejudice to Grounds No. 1 & 2 above, the Ld. PCIT in the impugned proceedings and the consequent order u/s 263 has not conducted any enquiry by himself and without even bringing on record as to the allegation towards “lack of enquiry” by the AO has not satisfied the requirement of proceedings u/s 263 or consequent order u/s 263 and as such the impugned proceedings u/s 263 and the consequent order u/s 263 is bad in law and in view of the facts and in the circumstances it may be held accordingly. 4. Without prejudice to Grounds No. 1, 2 & 3 above, the Ld. AO in the impugned proceedings u/s 263/ 143(3) (dt. 30.12.2016) had conducted the necessary enquiry so directed by the Ld. PCIT in order u/s 263 dt. 17.10.2016 and in view of the facts and in the circumstances the AO’s order cannot be held as “erroneous and prejudicial” and hence the order so passed by Ld. CIT is bad in law and it may be held accordingly. 5. Without prejudice to Grounds No. 1, 2, 3 & 4 above, the order passed by Ld. CIT u/s 263 dt. 12.3.2019 is barred by limitation particularly in view of the judgment of Hon’ble Supreme court and various High Courts in such respect and in view of the facts and in

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I.T.A. No.: 495/KOL/2022 Assessment Year: 2012-2013 M/s. Pearl Tracom Pvt. Ltd. the circumstances the impugned order u/s 263 is liable to be quashed / cancelled and it may be held accordingly. 6. For that your petitioner craves the right to put additional grounds and/or to alter/ amend/ modify the present grounds at the time of hearing.” 4. From perusal of the grounds, we find that the sole grievance of the assessee is that ld. PCIT erred in invoking jurisdiction u/s 263 of the Act and holding that the assessment order framed u/s 143(3) of the Act dated 20.03.2015 is erroneous and prejudicial to the interests of the Revenue. 5. Brief facts of the case are that the assessee is a private limited company. Loss of Rs. 74,252/- declared in e-return filed on 06.02.2013. Case selected for scrutiny through CASS followed by serving of notices u/s 143(2) & 142(1) of the Act. Various details called for were filed by the assessee. Considering the submissions made by the assessee ld. AO completed the assessment at Rs. 79,14,03,750/-. Thereafter, ld. CIT(A) called for the assessment records and carried out the revisionary proceedings u/s 263 of the Act and vide order dated 17.10.2016 held the order of ld. AO dated 20.03.2015 as erroneous and prejudicial to the interests of the Revenue and gave the following directions: “Considering the facts and circumstances of case as discussed above and as per submission of assessee, the assessment order was passed without making inquiries and verifications which would have been made and therefore the order passed on 20.03.2015 stands erroneous in so far as prejudicial to the interest of revenue and is set aside de novo with a direction to AO to carry out proper examination of books of accounts including Bank accounts of assessee as well as investors. A.O is also directed to examine of credits appearing in the books of assessee as share capital including premium and nature of transactions, identity of investor and its genuineness.

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I.T.A. No.: 495/KOL/2022 Assessment Year: 2012-2013 M/s. Pearl Tracom Pvt. Ltd. The assessment proceedings may be initiated at the earliest and to be completed without waiting time barring date. The A.O must provide Sufficient opportunity of being heard to the assessee in order to meet natural justice, equity and fairness.” 6. In compliance to the directions given u/s 263 of the Act ld. AO carried out the assessment proceedings and after examining the complete details of the share capital and share premium totalling to Rs. 79.14 Cr was satisfied that the assessee has duly explained the source of share capital and share premium and there is no scope of invoking the provisions of Section 68 of the Act accordingly vide order dated 30.12.2016 assessed the income at Rs. 1,17,342/-. 7. Again in the second round of revisionary proceedings u/s 263 of the Act were commenced by ld. Pr. CIT calling for the assessment records forming part of the assessment order dated 30.12.2016 and issued show cause notice dated 16.01.2019 raising the following issues: “(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 carry out 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. Page 5 of 49

I.T.A. No.: 495/KOL/2022 Assessment Year: 2012-2013 M/s. Pearl Tracom Pvt. Ltd. (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 30.12.2016 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.” 8. Revisionary proceedings were carried out and ld. Pr. CIT again held that ld. AO has not examined the source of share capital and share premium properly and failed to note that the share capital is introduced by rotating the money to dummy companies which have been created solely for this purpose. The details/documents available in the assessment records were not examined judiciously. Thereafter, ld. Pr. CIT has referred to certain judicial pronouncements and finally held the order of ld. AO dated 30.12.2016 as erroneous and prejudicial to the interests of the Revenue observing as follows: “7. In view of the facts and the legal position stated above, I am of the view that the order passed on an incorrect assumption of facts or incorrect application of law and without making requisite inquiries will satisfy the requirement of the order being erroneous and pre judicial to the interest of the revenue within the meaning and scope of Section 263 of the Income Tax Act, 1961 7.1. The afore stated decisions postulate that when the officer is expected to make an inquiry of a particular item of income and if he does not make an inquiry as expected, that would be a ground for the Commissioner to interfere with the order passed by the Officer since such an order passed by the Officer is erroneous and prejudicial to the interests of the Revenue (K.A. Ramaswamy Chettiar V. CIT, (1996) 220 ITR 657). Page 6 of 49

I.T.A. No.: 495/KOL/2022 Assessment Year: 2012-2013 M/s. Pearl Tracom Pvt. Ltd. 7.2. In my considered opinion, this is a case of lack of enquiry on the part of the AO. The decision on this issue could be taken only after examining and verifying the facts / submission of the AR on this score. Not collecting the full facts and not taking enquiry to logical end which could enable AO to take decision based on the totality of facts makes this order erroneous in so far as prejudicial to the interest of revenue 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. Accordingly, the assessment is set aside to the table of A.O on the issue as outlined in para- 2 above. 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.” 9. Aggrieved, the assessee is now in appeal before this Tribunal. Ld. Counsel for the assessee submitted that in compliance to the directions given by ld. CIT(A) in the order u/s 263 of the Act dated 17.10.2016 complete details were called before ld. AO and they have been examined in detail. Further, he submitted that the summons u/s 131 of the Act were issued to the directors of the investor companies to prove their identity, creditworthiness and genuineness and these directors have appeared and their statements were recorded u/s 131 of the Act on oath. Ld. Counsel for the assessee also referred to various details filed before ld. AO in the course of assessment proceedings carried out vide order dated 30.12.2016 which are as follows: Index V-1: “1. Assessment order of the appellant company date 20.03.2015 for the asst. Year 2012-13 (dt.20.03.15) 2. Copy of order u/s 263 passed CIT [dt. 17.10.16]

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I.T.A. No.: 495/KOL/2022 Assessment Year: 2012-2013 M/s. Pearl Tracom Pvt. Ltd. 3. Copy of order u/s 143(3) / 263 passed by AO [dt.30.12.16] 4. Letter dated 8.10.2014 of Padmawati Dealtrade Private Limited. 5. Letter dated October 2014 of Merlin Vintrade Pvt Ltd. 6. Letter dated 15.10.2014 of Tanvi Financial Consultants. 7. Letter dated 12.11.2014 of Srisiram Markom Pvt Ltd. 8. Letter dated 26.9.2014 of Shivkripa Designer Pvt Ltd. 9. Letter dated 7.11.2014 of Rising Cloth Marketing Pvt Ltd. 10. Letter dated 15.10.2014 of Regius Remedies Pvt Ltd. 11. A further letter of Regius Traders Pvt Ltd. 12. Letter dated 24.9.2014 of Ravishing Distributors Pvt Ltd. 13. Letter dated 30.10.2014 of Omsai Saree Sales Pvt Ltd. 14. Letter dated 14.11.2014 of Kalashdhan Dealcom Pvt Ltd. 15. Letter dated 3.11.2014 of Ratandeep Commercial Pvt Ltd. 16. Letter dated 18.11.2014 of Malcom Distributors Pvt Ltd. 17. Letter dated 14.10.2014 of Prabha Distributors Pvt Ltd. 18. Letter dated 28.10.2014 of Manmandir Agencies Pvt Ltd. 19. Letter of Pioneer Saree Merchants Pvt Ltd addressed to the. 20. Letter dated 3.11.2014 of Mangal Kalash Marketing Pvt Ltd. 21. Letter dated 31.10.2014 of Nazi Dealers Pvt Ltd. 22. Letter of Omsai Vinimay Pvt Ltd. 23. Letter of Vishwakanna Construction Advisory Pvt Ltd. 24. Letter dated 28.10.2014 of Virat Creation Traders Pvt Ltd. 25. Letter of Ujjwal Cloth Marketing Pvt Ltd. 26. Letter dated 26.9.2014 of Everlasting Commercial Pvt Ltd. 27. Letter dated 31.10.2014 of Hitech Saree Trading Pvt Ltd. 28. Letter dated 12.11.2014 of Leoline Dealtrade Pvt Ltd.

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I.T.A. No.: 495/KOL/2022 Assessment Year: 2012-2013 M/s. Pearl Tracom Pvt. Ltd. 29. Letter dated 25.9.2014 of Trinket Suppliers Pvt Ltd. 30. Letter dated 24.9.2014 of Rcalsunrisc Logitrans India Pvt Ltd. 31. Letter dated 24.9.2014 of Waltaz Exports Pvt Ltd. 32. Letter dated 24.9.2014 of Wellington Distributors Pvt Ltd. 33. Letter dated 27.10.2014 of Xavier Textrade Pvt Ltd. 34. Letter dated 15.10.2014 of Yathartha Consultancy Pvt Ltd. 35. Letter dated 18.11.2014 of Amazing Saree Merchants Pvt Ltd. 36. Letter dated 14.10.2014 of Advance Suppliers Pvt Ltd. 37. Letter dated 25.9.2014 of Arham Packaging Goods Private Limited. 38. Letter of Arrowlink Realtors Private Limited. 39. Balance Sheet, Profit & Loss Account for the Assessment Year 2012-13, Bank Statements. Allotment Advice, Source of Investment, Share Application documents and others of Blockdeal Developers Pvt Ltd. 40. Letter of Aryadeep Synthetics Pvt Ltd. 41. Letter dated 25.9.2014 of Capable Fashion Pvt Ltd. 42. Letter dated 31.10.2014 of Channing Distributors Pvt Ltd. 43. Letter dated 24.9.2014 of Diganta Distributors Pvt Ltd. 44. Letter dated 26.9.2014 of Dishika Marketing Pvt Ltd. 45. Letter dated 26.9.2014 of Fastspeed Marketing Pvt Ltd. 46. Letter of Historic Agencies Pvt Ltd. Index V-2: With reference to the above we hereby furnishing the following information as required by you. 1) Our PAN No. is AACCE9349K. 2) Xerox Copy of Balance Sheet, Profit & Loss Account and Income Tax Acknowledgement for the Assessment year 2012- 2013 are enclosed for your reference.

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I.T.A. No.: 495/KOL/2022 Assessment Year: 2012-2013 M/s. Pearl Tracom Pvt. Ltd. 3) Xerox copy of Bank Statement for the F. Y. 2011-12 of the relevant transaction is also enclosed herewith. 4) Copy of Allotment letter is enclosed 5) Source of investment is enclosed herewith.” 10. Further, reliance placed on the decision of this Tribunal in the case of M/s. Bhagwati Vintrade Private Limited vs ITO in ITA No. 195/Kol/2020 order dated 24.02.2021 which has been confirmed by Hon'ble Jurisdictional High Court in the case of PCIT vs. M/s. Bhagwati Vintrade Pvt. Ltd. in ITAT/184/2022 vide order dated 18.11.2022. Reliance also placed on another decision of this Tribunal in the case of Swasti Realinfra Pvt. Ltd. vs. ITO in ITA No. 1105/Kol/2019 order dated 11.01.2023. 11. On the other hand, ld. D/R vehemently argued supporting the following finding of ld. Pr. CIT given in the impugned order and submitted that ld. AO erred in not examining the details properly and he ought to have carried out necessary investigation and examined the financial statements of these companies that could have revealed that they all are jama-kharchi/paper companies and the alleged share capital and share premium received by the assessee are bogus/accommodation entries. 12. We have heard rival contentions and perused the records placed before us and also perused the assessment orders passed in the set aside proceedings and the decisions cited before us by both the parties. Through this appeal the assessee has raised various grounds of appeal but the sole grievance is that ld. Pr. CIT was wholly unjustified in setting aside the order of ld. AO u/s 143(3) r.w.s. 263 of the Act dated 30.12.2016 holding the said

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I.T.A. No.: 495/KOL/2022 Assessment Year: 2012-2013 M/s. Pearl Tracom Pvt. Ltd. order to be erroneous and prejudicial to the interests of the Revenue. 13.1. 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 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

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I.T.A. No.: 495/KOL/2022 Assessment Year: 2012-2013 M/s. Pearl Tracom Pvt. Ltd. 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." 13.2. 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. 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

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I.T.A. No.: 495/KOL/2022 Assessment Year: 2012-2013 M/s. Pearl Tracom Pvt. Ltd. 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. 13.3. 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 Page 13 of 49

I.T.A. No.: 495/KOL/2022 Assessment Year: 2012-2013 M/s. Pearl Tracom Pvt. Ltd. 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] 13.4. Hon’ble Apex Court in the case of CIT vs. Max India Limited as reported in 295 ITR 0282 has held that: “2. At this stage we may clarify that under para 10 of the judgment in the case of Malabar Industrial Co. Ltd. (supra) this Court has taken the view that the phrase "prejudicial to the interest of the Revenue" under s. 263 has to be read in conjunction with the expression "erroneous" order passed by the AO. Every loss of revenue as a consequence of an order of the AO cannot be treated as prejudicial to the interest of the Revenue. For example, when the 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 CIT does not agree, it cannot be treated as an erroneous order prejudicial to the interest of the Revenue, unless the view taken by the ITO is unsustainable in law.” 13.5. Hon'ble Madhya Pradesh High court in the case of CIT vs. Associated Food Products (P) Ltd as reported in 280 ITR 0377 has held that: “10. In view of the aforesaid pronouncement of law and taking into consideration the language employed under s. 263 of the Act, it is clear as crystal that before exercise of powers two requisites are imperative to be present. In the absence of such foundation exercise of a suomoto power is impermissible. It should not be presumed that initiation of power under suomoto revision is merely an administrative act. It is an act of a quasi-judicial authority and based on formation of an opinion with regard to existence of adequate material to satisfy that the decision taken by the AO is erroneous as well as prejudicial to the interests of the Revenue. The concept of "prejudicial to the interests of the Revenue" has to be correctly and soundly understood. It precisely means an order which has not been passed in consonance with the principles of law which has in ultimate eventuate affected realization of lawful revenue either by the State has not been realized or it has gone beyond realization. These two basic ingredients have

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I.T.A. No.: 495/KOL/2022 Assessment Year: 2012-2013 M/s. Pearl Tracom Pvt. Ltd. to be satisfied as sine qua non for exercise of such power. On a perusal of the material brought on record and the order passed by the CIT it is perceptible that the said authority has not kept in view the requirement of s. 263 of the Act inasmuch as the order does not reflect any kind of satisfaction. As is manifest the said authority has been governed by a singular factor that the order of the AO is wrong. That may be so but that is not enough. What was the sequitur or consequence of such order qua prejudicial to the interest of the Revenue should have been focused upon. That having not been done, in our considered opinion, exercise of jurisdiction under s. 263 of the Act is totally erroneous and cannot withstand scrutiny. Hence, the Tribunal has correctly unsettled and dislodged the order of the CIT. [Emphasis supplied]” 13.6. 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 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). 13.7. This view is further supported by the decision of the Hon'ble Gujarat High Court in the case of Shri Prakash Bhagchand Khatri Page 15 of 49

I.T.A. No.: 495/KOL/2022 Assessment Year: 2012-2013 M/s. Pearl Tracom Pvt. Ltd. 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." 13.8. 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: "63. 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

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I.T.A. No.: 495/KOL/2022 Assessment Year: 2012-2013 M/s. Pearl Tracom Pvt. Ltd. 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.” 64. 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 assume jurisdiction u/s 263 of the Act. In view of the above discussion, we hold that the assumption of jurisdiction 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." 13.9. 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

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I.T.A. No.: 495/KOL/2022 Assessment Year: 2012-2013 M/s. Pearl Tracom Pvt. Ltd. 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 jurisdiction 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 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.”

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I.T.A. No.: 495/KOL/2022 Assessment Year: 2012-2013 M/s. Pearl Tracom Pvt. Ltd. 13.10. 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.”

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I.T.A. No.: 495/KOL/2022 Assessment Year: 2012-2013 M/s. Pearl Tracom Pvt. Ltd. 14. Now, examining the facts of the instant case in light of the judicial precedence as discussed above in preceding paras, we observe that in the assessment proceedings u/s 143(3) of the Act were carried out in the case of the assessee for AY 2012-13 and ld. AO vide order dated 28.03.2015 held the share capital and share premium of Rs. 71.9 Cr as unexplained cash credit. Subsequent to this assessment order, ld. Pr. CIT invoked the provisions of Section 263 of the Act and vide order dated 17.10.2016 held the order to be erroneous and prejudicial to the interests of the Revenue since ld. AO has not carried out proper examination of books of accounts including bank accounts of the assessee as well as investors and also directed ld. AO to examine the credits appearing in the books of accounts as share capital including share premium, nature of transactions, identity of investors and its genuineness. In compliance thereto ld. AO carried out the assessment proceedings u/s 143(3) r.w.s. 263 of the Act. The return of income was originally filed on 19.11.2011 at a loss of Rs. 74,252/-. In the second round of assessment proceedings ld. AO issued a notice u/s 142(1) of the Act dated 11.11.2016 and called for complete details about the share capital and share premium received by the assessee company as well as complete details of the investor companies. Complete details have been filed by the assessee. Relevant extract of the finding of ld. AO in the assessment order dated 30.12.2016 reads as follows: “The assessee company filed its original return on 19.11.2011 at total loss of Rs. 74,252/-. The return was duly processed u/s. 143(1). The authorized capital of the assessee company was Rs, 7,00,00,000/- and paid up share capital of the assessee company as on 31.03.2012 was Rs. 1,09,90,900/- and the assessee company also received

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I.T.A. No.: 495/KOL/2022 Assessment Year: 2012-2013 M/s. Pearl Tracom Pvt. Ltd. share premium amounting to Rs. 78,31,16,100/-. The assessee company has shown receipt of fresh subscription to its share capital including share premium for Rs. 79,14,00,000/-. The case was selected for scrutiny through CASS system. The assessment u/s 143(3) of the IT Act was made on 20.03.2015 and the assessed income raised to Rs. 79,14,03,750/- with the addition of Rs. 79,14,00,000 /- on account of unexplained cash credit and Rs. 78,000/- due to disallowances of 'preliminary expenses written-off. Subsequently Ld. Principal Commissioner of Income Tax - 4, Kolkata passed order u/s. 263 on 17/10/2016 set aside de novo with direction to A.O. to carry out proper examination of books of accounts and bank accounts of assessee as well as investors. A.O. was also directed to examine the source of share application, identity of investors and its genuineness. Accordingly notice u/s. 142(1) was issued on 11/11/2016 and duly served on the assessee company. The case was fixed from time to time. Shri Vinay Kr. Singh, A/R of the assessee company appeared on different dates and produced copy of ITR, audited accounts, computation of income, details of directors, details of business activities, details of increase in share capital, Form 2 & Form 5, list of share-holders, details of bank account. He also produced the books of accounts and supporting documents to explain the balance sheet items and investment which is checked with bank statement entries. The said details were examined. The case was discussed & heard. Summons u/s. 131 of the IT. Act was issued to the directors of the investor companies to prove their Identity, genuineness, creditworthiness as required by Ld.Pr.CIT-4, Kolkata in his order passed u/s 263 dated 17/10/2016. Directors of the investor companies to whom summon u/s 131 were issued had appeared and their statement were recorded u/s. 131 of the LT. Act on oath along with books of accounts and other relevant documents which were checked and verified. Notice u/s. 133(6) were also issued to other investor companies and submission received thereon were checked and verified. The source of fund, identity, genuineness and creditworthiness were verified and found in order. The source of fund was verified and found in order. A Considering the circular no.5/2014 dt.11.02.2014 issued by CBDT, the disallowances in accordance with the section 14A of IT Act read with Rule 8D is computed on the average of investments. Hence, disallowance is made following Rule 80 which comes to 0.5% of 39,77,15,000 [(78,51,40,000+l,02,90,000)/2] being average value of Page 21 of 49

I.T.A. No.: 495/KOL/2022 Assessment Year: 2012-2013 M/s. Pearl Tracom Pvt. Ltd. investment= Rs. 19,88,575/-. But, the disallowances is subjected to maximum of expenses claimed. Therefore, Rs. 1,91,594/-, excluding Audit fees of Rs. 6,618/- Is added back to the total taxable income. Total income is computed as below: Total income as per return : Rs. (-) 74,252 /- Add : Disallowance u/s 14A as discussed in para A : Rs. 1,91,594/- Assessed income : Rs. 1,17,342/- Assessed u/s. 143(3)/263 as above. Issue copy of the order, computation sheet and demand notice to the assessee.” 15. The finding of ld. AO in itself makes it amply clear that complete details were filed and the directors of the investor companies personally appeared before ld. AO on being called for by issuing summons u/s 131 of the Act. Their statements were recorded u/s 131 of the Act on oath and they also referred to various books of accounts and other relevant documents. Ld. AO was satisfied with the source of funds, identity and creditworthiness of the share applicants and genuineness of the transactions. 16. The above finding clearly indicates that ld. AO conducted a complete enquiry and also examined all the relevant details as were directed by ld. Pr. CIT in the directions given in the order u/s 263 of the Act dated 17.10.2016. We also note that this is the second round of assessment proceedings. Even in the first round of the proceedings also all the share applicants replied directly to ld. AO enclosing the details of bank statement, financial audited balance sheet and profit and loss account, income tax return and other identity proof. Again in the second round, each and every detail have been examined by ld. AO. Therefore, complete enquiry has been conducted. Directors of the investor companies were

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I.T.A. No.: 495/KOL/2022 Assessment Year: 2012-2013 M/s. Pearl Tracom Pvt. Ltd. called for and they have appeared and accepted the transactions. It is not the case of no enquiry or incomplete enquiry. 17. In our view, this is a case of complete enquiry conducted by ld. AO taking into consideration all the angles which need to be taken for examining such type of transactions which in some cases are bogus or in the nature of accommodation entries. We also find that ld. Pr. CIT has merely given directions but for coming to this conclusion he ought to have first discussed that what details remained to be called for by ld. AO. Ld. Pr. CIT ought to have conducted the preliminary enquiry and had found some discrepancies or some glaring fact which could indicate that the alleged share capital and share premium are bogus in nature. In the first round of revisionary proceedings, ld. Pr. CIT/ld. CIT(A) has given detailed directions. Even though the assessee filed complete details in the first round of assessment proceedings but again in the second round of proceedings carried out subsequent to the order u/s 263 of the Act again the details have been filed. It has been properly demonstrated to the satisfaction of ld. AO that all the share applicants have sufficient net worth to make the investment in the equity share capital of the assessee company. The assessee has also satisfied ld. AO with complete documentary evidences that identity of each of the share applicants cannot be doubted as they are registered with Registrar of Companies and are regularly filing income tax return and all of these companies have been assessed to tax. The bank statements of these share applicant companies are available on record which justifies the source to make investment. Revisionary proceedings cannot give power to ld. Pr. CIT to direct ld. AO to examine again and again the Page 23 of 49

I.T.A. No.: 495/KOL/2022 Assessment Year: 2012-2013 M/s. Pearl Tracom Pvt. Ltd. same issues which have already been properly enquired for by ld. AO and satisfactory reply has been given by the assessee along with the documentary evidences which ld. AO has thoroughly examined all these details and made proper application of mind and taken a view permissible under the law. It is well settled that if the view taken by ld. AO is permissible under the law then it may or may not be prejudicial to the interests of the Revenue. 18. We find that recently this Tribunal in the case of M/s. Bhagwati Vintrade Private Limited (supra) has adjudicated the similar issues of carrying out of the revisionary proceedings and the directions were also similar for examination of share capital and share premium and this Tribunal on observing that ld. AO has carried out a detailed enquiry on this issue and has made proper application of mind, quashed the order u/s 263 of the Act observing as follows: “3. After hearing rival contentions, we find that the facts and circumstances of the cases of both the Assessment Years 2013-14 and 2012-13, the basis of the assessment order and the order passed u/s 263 of the Act are identical. The arguments advanced being the same, we follow the order of the ITAT in the assessee's own case for the Assessment Year 2013-14, dt. 17/02/2021, wherein, the ITAT had held as follows:- "10. We have heard rival contentions. On careful consideration of the facts and circumstances of the case, perusal of the papers on record, orders of the authorities below as well as case law cited, we hold as follows:- 11. The Assessing Officer in his order records that the assessee company has offered income u/s 115JB of the Act, by declaring book profits and this is a company which is doing business in the real sense. He also gives a finding that this is not a case of laundering of unaccounted income in the garb of share premium. He gave a specific finding that the investments made had every potential for

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I.T.A. No.: 495/KOL/2022 Assessment Year: 2012-2013 M/s. Pearl Tracom Pvt. Ltd. appreciating in future and this justifies the share premium. At page 5 & 6, the Assessing Officer refers to the directions of the Id. Pr. CIT and the results of the enquiry done by him in compliance with these directions of the Id. Pr. CIT. He records that summons were issued u/s 131 of the Act to the share holding company M/s. Lakshmi Dealmark Private Limited, for personal appearance. He gave a finding of fact that the share holding company is in investment activities and had undertaken several transactions of investments. He recorded that departmental inspector was deputed for inspection and that the report of the inspector supports the claim of the assessee. He also gave details of his findings on examination of the various documents filed by the shareholder at pages 5 & 6 of his order. Statements were recorded on oath from the directors of the shareholder companies M/s. Lakshmi Dealmark Private Limited. After all these enquiries, the Assessing Officer accepted the claim of the assessee. The ld. Pr. CIT in his order u/s 263 of the Act dt. 29/02/2020, states that the Assessing Officer has not examined the details judiciously and that there were not enough enquiries made. This finding is factually incorrect. It is not the case of the Id. Pr. CIT that this is a case of no enquiry or a case where the Assessing Officer has not applied his mind. It is settled law that an assessment order passed u/s 143(3) of the Act, cannot be revised on the ground that, in the opinion of the Id. Pr. CIT, the enquiries were not adequate. The observations of the Id. Pr. CIT demonstrates that his grievance is that the conclusions drawn by the Assessing Officer based on the examination of evidence are different from the conclusions that might have been drawn by him had he been the Assessing Officer. This is no ground for making a revisions. The recordings of the Id. Pr. CIT that the Assessing Officer has not examined the justification of fixing of share premium or that has not examined or enquired into the authenticity of the transaction, and that he has not enquired the possibility of the transaction being sham and the activity being a case of laundering of unaccounted income etc., is against facts. In fact, the Assessing Officer has in detail described the enquiries made by him and his findings on such enquiries. The Id. Pr. CIT further comments as follows:- "The interests of the revenue are not to be equate to rupees or paisa merely." Then, he goes on to state that, the Commissioner may think that the order is prejudicial to the revenue administration. These observation

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I.T.A. No.: 495/KOL/2022 Assessment Year: 2012-2013 M/s. Pearl Tracom Pvt. Ltd. are not in accordance with law as can be seen from various judgments which are dismissed by us. 12. This Bench of the Tribunal under identical circumstances, in the case of Amritrashi Infra Pvt. Ltd. vs. PCIT in ITA No. 838/Kol/2019, dt. 12/08/2020, held as follows:- "46. In the light of the afore-cited judicial precedents, let us examine the case in hand and find out whether pursuant to the specific direction of First Ld. Pr. CIT, the second AO has discharged his role as an investigator in respect of share capital and premium collected by the assessee or whether the AO failed to enquire on this issue and whether his re-assessment/second assessment order is a plausible view or it can be termed as an unsustainable view in law. We on a conjoint reading of the First Revisional Order of the First Pr. CIT dated 23.08.2016 and the reassessment /Second assessment of the AO dated 07.12.2016, the following facts can be discerned:- (a)The First Ld. Pr. CIT has recorded a finding after perusal of the first assessment records/folder that during the first round of scrutiny proceeding, the assessee company produced the following documents before the first AO in the original assessment to satisfy the AO in respect of identity, creditworthiness and genuineous of share subscribers:- (i) audited financial statements; (ii) copy of Form filed with the ROC; (iii) copy of PAN Card of the assessee company; (iv) details and copy of share applicants; (v) bank statement reflecting the transaction; (vi) records relating to investors in order to establish identity, genuineness and creditworthiness of the share subscribers. 47. We note that the First Ld. Pr. CIT in his first revisional order, found that AO in the first assessment proceedings though has been provided with the aforesaid documents has not examined these documents, which according to him, should have been carried out by the AO. The First Ld. Pr. CIT at para (4) of his first revisional order has clearly made a finding that " From the above discussion it is evident that the assessment proceedings in the case of assessee was completed in a very casual manner and hurried manner flouting all established

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I.T.A. No.: 495/KOL/2022 Assessment Year: 2012-2013 M/s. Pearl Tracom Pvt. Ltd. procedures. The assessee had discharged its onus by furnishing/documents before the AO." Further, the First Ld. Pr. CIT mainly found fault with the AO's order for non-issuance of notice u/s. 133(6) of the Act to the shareholders. The First Ld. Pr. CIT found fault with the AO's order in not discussing the basis of evidence on which adverse inference was drawn against the assessee. Moreover, the First Ld. Pr. CIT found fault with the AO for not bothering to examine the contention of the assessee or to bring on record anything against the assessee and thus according to him, the AO with a pre-determined mind has simply jumped to the conclusion that the share capital collected by assessee as unexplained cash credit u/s. 68 of the Act. Therefore, according to the First Ld. Pr. CIT, the first original assessment order framed u/s. 143(3) of the Act dated 26-03- 2015 was against the principle of natural justice and, therefore, he found it fit to order denovo assessment and gave specific direction in respect of share capital & premium collected by assessee. 48. Thereafter, the Id. Pr. CIT was pleased to direct "………assessment order passed on 26.03.2015 is set aside de novo with the direction to the AO to carry out proper examination of books of account and bank statement of the assessee as well as the investor. The AO is also directed to examine the source of share application, entity of investor and its genuineness", (emphasis given by us). He also directed that the assessment proceedings to be initiated at the earliest and to be completed without waiting for time bar limit. With the aforesaid specific direction, the First Ld. Pr. CIT has set aside the first original assessment order dated 26-03-2015. 49. So we note that the second AO was specifically directed by the First Ld. Pr. CIT to carry out the following actions in addition to de- novo assessment which means the second AO is free to assess the income of assessee afresh, however, he has to do the following specific actions as directed in respect of share-applicants who applied for shares in assessee-company. The specific directions of Ld. Pr CIT to AO are as under: i) To carry out proper examination of the books of accounts and bank account of the assessee; ii) To carry out proper examination of the books of accounts and bank account of the investors; iii) AO to examine the source of the share applicants; iv) The AO to examine the identity of the investor and its genuineness; Page 27 of 49

I.T.A. No.: 495/KOL/2022 Assessment Year: 2012-2013 M/s. Pearl Tracom Pvt. Ltd. ITR filed Sl. Name of company CIN PAN for AY No. 2012- 13 1. M/s. K. R. Overseas Pvt. U51109 AACCK0101B yes Ltd. WB1994PTC061965 2. M/s. Kakrania Trading 870101WB1994PTC062137 AABCKI51611 yes Pvt. Ltd. 3. M/s. AmbalaTrafin Pvt. U67120WB1995PTC0743 AACCA1184G yes Ltd. 97 4. M/s. Subhiksha Pvt. Ltd. U52190WB2011PTC157073 AAPCS2068E yes 5. M/s. Shivarshi U45400WB2011PTC170957 AAQCS7848M yes Construction Pvt. Ltd. 6. M/s. Shivashiv Pvt. Ltd. U74999WB2012PTC173749 AARCS0094C yes 7. M/s. Flowtop Agency U52190WB2012PTC173352 AABCF9036D yes Pvt. Ltd. 8. M/s. SukhSagar U45400WB2011 PTCI AARCS1553N yes Residency Pvt. Ltd. 70958 9. M/s. Kamaldhan U45400WB2011PTC170944 AAECK6810D yes Developers Pvt. Ltd. 10 M/s. Labhdhanlmpex U51909 WB2011 PTCI AACCL2111J yes Pvt. 71524 Ltd. 11 M/s. Subhsreelmpex Pvt. U51909WB2011 PTCI AARCS1845D yes Ltd. 71513 12 M/s. Maharaja U51109 WB2005PTCI02343 AAECM224E yes Merchants Pvt. Ltd. 13 M/s. Sristi Sales Pvt. U51109WB2005PTC102121 AAICS8900L yes Ltd. v) The AO to complete the assessment at the earliest without waiting for the time barring date. 50. In the second round before the AO for de novo re-assessment, the second AO as per the specific direction of the First Ld. Pr. CIT (supra), conducted the reassessment proceeding. As per the specific direction of Ld. First Pr. CIT, the Second AO firstly summoned the director of the assessee company Shri NavinTahin before him, who duly appeared and produced the books of account on 01.12.2016 and furnished the relevant details viz., (i) copy of ITR, (ii) audited accounts, (Ui) details of directors, (iv) the details of the share-applicants, (v) details of business activity, (vi) details of increase in share capital, (vii) Form 2, (viii) Form 5, (ix) bank statements evidencing payment through banking transaction, which fact the AO has acknowledged in the reassessment order. [And here we should keep in mind that the First Ld. Pr. CIT's finding of fact after perusal of original assessment records that assessee in the first round before AO has produced PAN, ROC details, audited financial statements, details and copy of share applicants, bank statements reflecting the transaction, records relating to investors to establish identity, creditworthiness & genuineness. And the finding of First Ld. Pr. CIT that assessee had Page 28 of 49

I.T.A. No.: 495/KOL/2022 Assessment Year: 2012-2013 M/s. Pearl Tracom Pvt. Ltd. discharged its onus by furnishing/documents before the AO Secondly, after examining these documents, we also find that the second AO issued notices u/s. 133(6) of the Act to all the thirteen (13) share applicants and pursuant to the notice, all the shareholders have filed their respective (i) PAN details, (ii) CIN detail, (Ui) Audited Annual Report for FY 2011-12 (AY 2012-13), (iv) ITR acknowledgment for AY 2012-13 which the AO acknowledges that he verified the same and thus we note that the identity of the investors were duly furnished by the assessee's director; and the AO verified the veracity of the same from all the share applicants by issuing notice u/s 133(6) of the Act and moreover it is common knowledge that in this computer/digital era, the AO on a click of the mouse, could have easily verified the identity of the share applicant which is available in the website of Ministry of Corporate Affairs and the ITR Acknowledgments filed by them, will enable the AO to cross verify and collect details from the AO of the respective share applicants and independently from the Revenue's departmental data base. We note that all the share subscribing parties filed all the documents called for by the AO [PB-2] and were also examined by the AO along with audited accounts from which these details show their identity. 51. Thus, we note that the AO after verification as aforesaid, has not drawn any adverse opinion or doubted the identity of the share applicants which view of AO is a possible view in the light of the documents referred to and we also by applying the presumption in section 114 of Indian Evidence Act 1872, we presume that the quasi- judicial act of the second AO have been regularly performed. Coming to the contention of Ld. CIT, DR, that order sheet maintained by the Second AO does not reveal that AO had issued notice u/s. 133(6) of the Act to the share subscribers, we note that the AO in his reassessment/second assessment order has clearly asserted that he had issued notice u/s. 133(6) of the Act to all the share applicants as directed by the First Ld. Pr. CIT and we note from the perusal of some letters written by the share applicants clearly referring to the AO's sec. 133(6) notice (refer inter-alia page 32 of PB-I). So, the clear assertion of the Second AO in his order that pursuant to his issue of notice u/s. 133(6), he received the documents called for cannot be disbelieved merely because he did not mention this event in the order sheet. Moreover, the assessee or the share applicants does not have any control over the order sheet maintained by the AO and the failure of AO to mention this action cannot be a reason to disbelieve the AO's assertion that he issued notice u/s. 133(6) of the Act. Moreover, we have to examine the re-assessment/second assessment order of AO Page 29 of 49

I.T.A. No.: 495/KOL/2022 Assessment Year: 2012-2013 M/s. Pearl Tracom Pvt. Ltd. and not the order-sheet maintained by him which has not been negatively commented upon by the Second Ld Pr CIT and it is not the fault for which the Ld Pr CIT exercised his power u/s 263 of the Act. Thus, we note that second AO issued sec. 133(6) notice and collected documents running more than 352 pages. Moreover, the First Ld. Pr. CIT while setting aside the first AO's order has returned a finding that assessee in the first round itself has filed the relevant documents to prove the identity, creditworthiness and genuineness of the share capital and that assessee had discharged its onus by filing the same. So we find that during the second round, the AO issued notices to share-holders u/s. 133(6) and after perusing their replies and supporting documents and thereafter having verified their veracity, the second AO was satisfied with the explanation of assessee in respect to the nature and source of share capital which view of second AO cannot be faulted. And we also note that all the share-holders are regular income tax assessee's. Therefore in the light of the aforesaid documents discussed their identity cannot be disbelieved and the AO's satisfaction in respect of identity of the shareholders is a possible view and cannot be termed as unsustainable in law or facts. 52. Coming to the creditworthiness of the shareholders, our attention was drawn to the balance sheet of the shareholders (PB- 2) which was filed before the AO and the Ld. Pr. CIT and we note that their source of investment and net worth as per balance sheet as on 31.03.2012 as well as the sum invested by them in the assessee is discernible as under: Sum invested in Source of Capital & Name assessee's investment Reserves business M/s. K. R. Page 8 Paper Rs.66,77,47,921 Rs.1,30,000/- Overseas Pvt. Ltd. Book-2 (page 22 PB-2) M/s. Kakrania Page 45Paper Rs.66,52,71,914 Rs.1,39,00,000/- Trading Pvt. Ltd. Book-2 (page 62 PB-2) M/s. Page 88Paper Rs.624,711,003 Rs.4,40,00,000/- AmbalaTrafinpvt. Book-2 (page 101 PB-2) Ltd. M/s. Subhiksha Page 115Paper Rs.222,397,317 Rs.45,00,000/- Pvt. Ltd. Book- 2 (page 128 PB-2) M/s. Shivarshi Page 146Paper Rs.53,89,95,046 Rs.4,66,00,000/- Construction Pvt. Book- 2 (page 153 PB-2) Ltd. M/s. Shivashiv Page 170Paper Rs.14,29,56,146 Rs.6,55,00,000/- Pvt. Ltd. Book- 2 (page 178 PB-2) M/s. Flowtop Page 193Paper Rs.15,38,94,946 Rs.4,49,00,000/- Agency Pvt. Ltd. Book- 2 (page 200 PB-2)

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I.T.A. No.: 495/KOL/2022 Assessment Year: 2012-2013 M/s. Pearl Tracom Pvt. Ltd. M/s. Sukh Sagar Page 212 Paper Rs.56,18,93,960 Rs.2,31,00,000/- Residency Pvt. Ltd. Book-2 (page 220 PB-2) M/s. Kamaldhan Page246- Rs.56,18,94,080 Rs.12,54,00,000/- Developers Pvt. 247Paper (page 254 PB-2) Ltd. Book-2 M/s. Labhdhan Page 270 Rs.56,18,94,080 Rs. 3,80,00,000/- Impex Pvt. Ltd. PaperBook- 2 (page 277 PB-2) M/s. Subhsreel Page 290 of Rs.76,60,93,960 Rs. 2,76,00.000/- mpex Pvt. Ltd. paper book (page 297 PB-2) M/s. Maharaja Rs.1,54,58,399 Rs. 50,00,000/- - Merchants Pvt. Ltd. (page 313 PB-2) M/s. Sristi Sales Rs.1,12,25,632 Rs.50,00,000/- - Pvt. Ltd. (page 336 PB-2) 53. So, from a perusal of the above chart, we note that the assessee and the shareholders have brought to the notice of Second AO that they (share subscribers) have enough net worth to invest in the assessee company and the share subscribing companies pursuant to the AO's notice u/s. 133(6) of the Act have furnished their respective audited accounts from which the aforesaid facts are clearly discernible and moreover the share subscribers have also filed before the second AO the source from which they subscribed to shares of assessee (though not required as per law in force for AY 2012-13), bank statement, audited balance sheet etc except M/s Maharaja and M/s Sristi Sales. Thus the assessee had discharged the onus on it about the creditworthiness of the share- holders. So we note that the source of the investments has been clearly brought to the notice of the second AO during the assessment/reassessment proceedings. Further, the bank statements of all the shareholders as well as that of assessee were filed before the AO, which revealed that the share capital and premium have been subscribed by them through banking channel (NEFT or cheque) which goes on to show that the assessee has discharged the onus in respect of genuineness of the transaction. Based on the documents and materials called for by the AO who accepted the same after verification is an act of enquiry. And we note that revenue has not brought on record any material to challenge the veracity of the documents referred to above. Moreover, the second Ld. Pr. CIT in his impugned order has not brought any material to rebut the presumption of second AO to justify his intervention u/s. 263 of the Act and which would have upset the decision of the second AO's factual view on the identity, creditworthiness and genuinity of the share transaction. In such a scenario, the second AO's view based on the documents referred to by him is a plausible view and in consonance with judicial precedents (supra) which we would like to discuss/ examine each share subscribers totaling thirteen (13) infra:-

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I.T.A. No.: 495/KOL/2022 Assessment Year: 2012-2013 M/s. Pearl Tracom Pvt. Ltd. (i) On perusal of the paper book-2, it reveals that the documents are placed at page 12 to 37 of share applicant M/s. K.R. Overseas Pvt. Limited which is a Private Limited Company, and which has Permanent Account No. AACCK0101B and CIN U51109WB1994PTC061965 and its Net-worth as on 31.03.2012 (in total)- share capital & reserve is to the tune of Rs.66,77,47,921/- (PB page 22) and the investment made in the assessee-company including the share premium comes to Rs.1,30,00,000/-. The payment has been made through banking channel and deposit amount of Rs.1,05,00,000/- took place as on 01.03.2012 by NEFT and Rs.25,00,000/- as on 06.03.2012. The Board Resolution for investment of the Company is filed and the share application form, ITR acknowledgment, Bank statement, explanation of source of funds as well as financial statements have been filed by the assessee at P. B page 3-37and thus we note that the assessee had duly discharged its onus to prove the identity of the share applicants by adducing PAN as well as income-tax returns. The financial statement shows that the share applicant had enough funds to invest in the assessee-company and the transaction has happened through banking channel. Further, it is noted that the share applicant had furnished the source of investment made in the assessee-company after getting the notice under section 133(6) of the Act. (ii) We note from a perusal of the paper book-2 pages 38 to 77, the details of share applicant M/s. Kakrania Trading Pvt. Ltd. It is a Private Limited Company which has a PAN AABCK151611and its CIN number is U70101WB1994PTC062137 and the Net worth of this company as on 31.3.2012Rs.66,52,71,914/- (PB-page62) and investment made in the assessee company is to the tune of Rs.1,39,00,000/- and this share applicant has made the transaction through banking channel four times on 01.03.2012 Rs.30,00,000 through NEFT; and by cheque on 02.03.2012a sum of Rs. 59,00,000/- ; and on 7.3.2012 and by cheque on 12.3.2012 Rs. 25 lakh each. There is board resolution for investment in assessee's company and Share Application Form, Bank statement, ITR acknowledgement, and explanation of source of fund as well as financial statement available in the PB-page 39 to 77. This share applicant regularly filed Income Tax Return (ITR) and it has filed its Bank statement. This company has furnished the details of source of Funds and has duly filed financial statements and thus we note that the assessee had duly discharged its onus to prove the identity of the share applicant by adducing PAN as well as income-tax returns. The financial statement shows that the share applicants had enough funds to invest in the Page 32 of 49

I.T.A. No.: 495/KOL/2022 Assessment Year: 2012-2013 M/s. Pearl Tracom Pvt. Ltd. assessee-company and the transaction has happened through banking channel. Further, it is noted that the share applicant had furnished the source of investment made in the assessee-company after getting the notice under section 133(6) of the Act. (iii) We note from a perusal of the paper book-2 pages78 to 111, the details of share applicant M/s. Ambala Trafin Pvt. Ltd. It is a Private Limited Company which has a PAN AACCA1184G and its CIN number is U67120WB1995PTC074397 and the Net worth of this company as on 31.3.2012 Rs.62,47,11,003- (PB-pagelOl) and investment made in the assessee company is to the tune of Rs. 4,40,00,000/- and this share applicant has made the transaction through banking channel on 01.03.2012 Rs. 25 lakhs; and on 03.03.2012 Rs. 40 lakhs through NEFT; and by cheque on Rs. 3,75,00,000/-on 27.3.2012 . There is board resolution for investment in assessee's company and Share Application Form, Bank statement, ITR acknowledgement, explanation of source of fund as well as financial statement available in the PB-page 79 to 111 in the PB-II. This share applicant regularly filed Income Tax Return (ITR) and it has filed its Bank statement. This company has furnished the details of source of Funds and has duly filed financial statements. Thus we note that the assessee had duly discharged its onus to prove the identity of the share applicants by adducing PAN as well as income- tax returns. The financial statement shows that the share applicant had enough funds to invest in the assessee-company and the transaction has happened through banking channel. Further, it is noted that the share applicants had furnished the source of investment made in the assessee- company after getting the notice under section 133(6) of the Act. (iv) We note from a perusal of the paper book pages-2,112 to 137, the details of share applicant M/s. Subhiksha Pvt. Ltd. It is a Private Limited Company which has a PAN AAPCS2068E and its CIN number is U52190WB2011PTC157073 and the Net worth of this company as on 31.3.2012 Rs.22,23,97,317/- (PB-page 128.) and investment made in the assessee company is to the tune of Rs. 45,00,000/- and this share applicant has made the transaction through banking channel on 02.03.2012 a sum of Rs.45 lakhs through NEFT. There is board resolution for investment in assessee's company and Share Application Form Bank statement, ITR acknowledgement, explanation of source of fund as well as financial statement available in the PB- page 113 to 137 in the PB. This share applicant regularly filed Income Tax Return (ITR) and it has filed its Bank statement. This company has furnished the details of source of Funds and has duly filed

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I.T.A. No.: 495/KOL/2022 Assessment Year: 2012-2013 M/s. Pearl Tracom Pvt. Ltd. financial statements and thus we note that the assessee had duly discharged its onus to prove the identity of the share applicants by adducing PAN as well as income-tax returns. The financial statement shows that the share applicant had enough funds to invest in the assessee-company and the transaction has happened through banking channel. Further, it is noted that the share applicants had furnished the source of investment made in the assessee- company after getting the notice under section 133(6) of the Act. (v) We note from a perusal of the paper book-2, pages 138 to 159 the details of share applicant M/s. Shivarshi Construction Pvt. Ltd. It is a Private Limited Company which has a PAN AAQCS7848M and its CIN number is U45400WB2011PTC170957 and the net worth of this company as on 31.3.2012 Rs.53,89,95,046/- (PB-page 153) and investment made in the assessee company is to the tune of Rs. 4,66,00,000/- and this share applicant has made the transaction through banking channel on 29.03.2012 Rs.4,66,00,000/-through Cheque. There is board resolution for investment in assessee's company and Share Application Form Bank statement, ITR acknowledgement, explanation of source of fund as well as financial statement available in the PB-page 139 to 159 in the PB. This share applicant regularly filed Income Tax Return (ITR) and it has filed its Bank statement. This company has furnished the details of source of Funds and has duly filed financial statements. This share applicant regularly filed Income Tax Return (ITR) and it has filed its Bank statement and thus we note that the assessee had duly discharged its onus to prove the identity of the share applicants by adducing PAN as well as income-tax returns. The financial statement shows that the share applicant had enough funds to invest in the assessee-company and the transaction has happened through banking channel. Thus the assessee has discharged the onus to prove the identity, creditworthiness and genuineness of the transactions. Further, it is noted that the share applicants had furnished the source of investment made in the assessee-company after getting the notice under section 133(6) of the Act. (vi) We note from a perusal of the paper book pages-2, 160 to 184 the details of share applicant M/s. Shivashiv Dealcom Pvt. Ltd. It is a Private Limited Company which has a PAN AARCS0094C and its CIN number is U74999WB2012PTC 173749 and the net worth of this company as on 31.3.2012 Rs.l4,29,56,146/-(PB-page 178) and investment mode in the assessee company is to the tune of Rs.6,55,00,000/- and this share applicant has made the transaction

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I.T.A. No.: 495/KOL/2022 Assessment Year: 2012-2013 M/s. Pearl Tracom Pvt. Ltd. through banking channel on 29.03.2012 Rs.6,55,00,000/- through Cheque. There is board resolution for investment in assessee's company and Share Application Form Bank statement, ITR acknowledgement, explanation of source of fund as well as financial statement available in the PB-page 161 to 184 in the PB. This share applicant regularly filed Income Tax Return (ITR) and it has filed its Bank statement. This company has furnished the details of source of Funds and has duly filed financial statements and thus we note that the assessee had duly discharged its onus to prove the identity of the share applicants by adducing PAN as well as income-tax returns. The financial statement shows that the share applicant had enough funds to invest in the assessee-company and the transaction has happened through banking channel. Thus the assessee has discharged the onus to prove the identity, creditworthiness and genuineness of the transactions. Further, it is noted that the share applicants had furnished the source of investment made in the assessee-company after getting the notice under section 133(6) of the Act. (vii) We note from a perusal of the paper book-2, pages 185 to 206 the details of share applicant M/s. Flowtop Agency Pvt. Ltd. It is a Private Limited Company which has a PAN AABCF9036D and its CIN number is U52190WB2012PTC 173352and the net worth of this company as on 31.3.2012 Rs.15,38,94,946/- (PB-page 200) and investment made in the assessee company is to the tune of Rs. 4,49,00,000/- and this share applicant has made the transaction through banking channel on 30.03.2012 Rs.4,49,00,000/- through Cheque. There is board resolution for investment in assessee's company and Share Application Form, Bank statement, ITR acknowledgement, explanation of source of fund as well as financial statement available in the PB-page 186 to 206 n the PB. This share applicant regularly filed Income Tax Return (ITR) and it has filed its Bank statements and thus we note that the assessee had duly discharged its onus to prove the identity of the share applicants by adducing PAN as well as income-tax returns. The financial statement shows that the share applicant had enough funds to invest in the assessee-company and the transaction has happened through banking channel. Thus the assessee has discharged the onus to prove the identity, creditworthiness and genuineness of the transactions. Further, it is noted that the share applicants had furnished the source of investment made in the assessee-company after getting the notice under section 133(6) of the Act.

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I.T.A. No.: 495/KOL/2022 Assessment Year: 2012-2013 M/s. Pearl Tracom Pvt. Ltd. (viii) We note from a perusal of the paper book pages-2,207 to 226 the details of share applicant M/s. SukhSagar Residency Pvt. Ltd. It is a Private Limited Company which has a PAN AARCS1553N and its CIN number is U45400WB2011PTC170958and the net worth of this company as on 31.3.2012 Rs.56,18,93,960/-(P.B-2 pages-220) and investment made in the assessee company is to the tune of Rs.2,31,00,000/- and this share applicant has made the transaction through banking channel on 31.3.2012 Rs. 2,31,00,000/- through NEFT. There is board resolution for investment in assessee's company and Share Application Form, Bank statement, ITR acknowledgement, explanation of source of fund as well as financial statement available in the PB-page 208-226 in the PB. This share applicant regularly filed Income Tax Return (ITR) and it has filed its Bank statement. This company has furnished the details of source of Funds and has duly filed financial statements and thus we note that the assessee had duly discharged its onus to prove the identity of the share applicants by adducing PAN as well as income-tax returns. The financial statement shows that the share applicant had enough funds to invest in the assessee-company and the transaction has happened through banking channel. Thus the assessee has discharged the onus to prove the identity, creditworthiness and genuineness of the transactions. Further, it is noted that the share applicants had furnished the source of investment made in the assessee-company after getting the notice under section 133(6) of the Act. (ix) We note from a perusal of the paper book-2, pages 227 to 261 the details of share applicant M/s. Kamaldhan Developers Pvt. Ltd. It is a Private Limited Company which has a PAN AAECK6810D and its CIN number is U45400WB2011 PTC 170944 and the net worth of this company as on 31.3.2012 Rs.56,18,94,080/- and investment made in the assessee company is to the tune of Rs.12,54,00,000/- and this share applicant has made the transaction through banking channel on 31.03.2012 Rs. 12,54,00,000/- through NEFT. There is board resolution for investment in assessee's company and Share Application Form, Bank statement, ITR acknowledgement, explanation of source of fund as well as financial statement available in the PB-page 228 to 261 in the PB. This share applicant regularly filed Income Tax Return (ITR) and it has filed its Bank statement. This company has furnished the details of source of Funds and has duly filed financial statements. This share applicant regularly filed Income Tax Return (ITR) and it has filed its Bank statement. This company has furnished the details of source of Funds and has duly filed financial statements. The financial statement shows that the share Page 36 of 49

I.T.A. No.: 495/KOL/2022 Assessment Year: 2012-2013 M/s. Pearl Tracom Pvt. Ltd. applicant had enough funds to invest in the assessee-company and the transaction has happened through banking channel. Thus the assessee has discharged the onus to prove the identity, creditworthiness and genuineness of the transactions. Further, it is noted that the share applicants had furnished the source of investment made in the assessee-company after getting the notice under section 133(6) of the Act. (x) We note from a perusal of the paper book-2, pages 262 to 283 the details of share applicant M/s. Labhdhan Impext Pvt. Ltd. It is a Private Limited Company which has a PAN AACCL2111J and its CIN number is U51909WB2011PTC171524 and the net worth of this company as on 31.3.2012 Rs.56,18,94,080/- (P.B-2, page 277) and investment made in the assessee company is to the tune of Rs.3,80,00,000/- and this share applicant has made the transaction through banking channel on 31.03.2012 a sum of Rs.3,80,00,000/- through NEFT. There is board resolution for investment in assessee's company and Share Application Form, Bank statement, ITR acknowledgement, explanation of source of fund as well as financial statement available in the PB-page 163-283 in the PB. This share applicant regularly filed Income Tax Return (ITR) and it has filed its Bank statement. This company has furnished the details of source of Funds and has duly filed financial statements. The financial statement shows that the share applicant had enough funds to invest in the assessee-company and the transaction has happened through banking channel. Thus the assessee has discharged the onus to prove the identity, creditworthiness and genuineness of the transactions. Further, it is noted that the share applicants had furnished the source of investment made in the assessee-company after getting the notice under section 133(6) of the Act. (xi) We note from a perusal of the paper book-2 pages 284 to 303 the details of share applicant M/s. Subhsree Impex Pvt. Ltd. It is a Private Limited Company which has a PAN AARCS1845D and its CIN number is U51909WB2011PTC171513 and the net worth of this company as on 31.3.2012 Rs.76,66,93,960/- (P.B-2, page-297)and investment made in the assessee company is to the tune of Rs.2,76,00,000/- and this share applicant has made the transaction through banking channel on 31.03.2012 a sum of Rs.2,76,00,0000/-through NEFT. There is board resolution for investment in assessee's company and Share Application Form, Bank statement, ITR acknowledgement, explanation of source of fund as well as financial statement available in the PB-page 285-303 in the PB. This share applicant regularly filed

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I.T.A. No.: 495/KOL/2022 Assessment Year: 2012-2013 M/s. Pearl Tracom Pvt. Ltd. Income Tax Return (ITR) and it has filed its Bank statement. This company has furnished the details of source of Funds and has duly filed financial statements. The financial statement shows that the share applicant had enough funds to invest in the assessee-company and the transaction has happened through banking channel. Thus the assessee has discharged the onus to prove the identity, creditworthiness and genuineness of the transactions. Further, it is noted that the share applicants had furnished the source of investment made in the assessee-company after getting the notice under section 133(6) of the Act. (xii) We note from a perusal of the paper book-2, pages 304 to 326 the details of share applicant M/s. Maharaja Merchants Pvt. Ltd. It is a Private Limited Company which has a PAN AAECM224E and its CIN number is U51109WB2005PTC102343 and the net worth of this company as on 31.3.2012 Rs.1,54,58,399/-(page 313 of P.B-2)and investment made in the assessee company is to the tune of Rs.50 lakhs and this share applicant has made the transaction through banking channel on 28.02.2012 a sum of Rs.501akhs through Cheque. There is Share Application Form, Bank statement, ITR acknowledgement, financial statement available in the PB-page 304 to 326 in the PB. This share applicant regularly filed Income Tax Return (ITR) and it has filed its Bank statement. The financial statement shows that the share applicant had enough funds to invest in the assessee-company and the transaction has happened through banking channel. Thus the assessee has discharged the onus to prove the identity, creditworthiness and genuineness of the transactions. Further, it is noted that the share applicants had furnished the source of investment made in the assessee- company after getting the notice under section 133(6) of the Act. (xiii) We note from a perusal of the paper book-2 pages 327 to 352 the details of share applicant M/s. Sristi Sales Pvt. Ltd. It is a Private Limited Company which has a PAN AAICS8900L and its CIN number is U51109WB2005PTC 102121 and the net worth of this company as on 31.3.2012 Rs.1,12,25,612/- and investment made in the assessee company is to the tune of Rs.50 lakhs and this share applicant has made the transaction through banking channel on 28.02.2012 a sum of Rs. 50 lakhs through Cheque. There is Share Application, Bank statement, ITR acknowledgement, financial statement available in the PB-2, page 328 to 352. This share applicant regularly filed Income Tax Return (ITR) and it has filed its Bank statement. The financial statement shows that the share applicant had enough funds to invest

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I.T.A. No.: 495/KOL/2022 Assessment Year: 2012-2013 M/s. Pearl Tracom Pvt. Ltd. in the assessee-company and the transaction has happened through banking channel. Thus the assessee has discharged the onus to prove the identity, creditworthiness and genuineness of the transactions. Thus from the discussion above, it is noted except the last two investors the other eleven (11) share applicants out of thirteen (13) share-holders had furnished the source of investment made in the assessee-company after getting the notice from second AO under section 133(6) of the Act. Thus we note that the AO on the basis of the aforesaid documents has taken a plausible view and did not draw any adverse inference against the assessee, and the view thus taken by the AO cannot be termed as unsustainable in law. 54. So, from the aforesaid facts revealed during the second round, we note that AO has discharged his duty as an Investigator and enquired as per the direction of the First Ld. Pr. CIT dated 23.08.2016 u/s. 263 of the Act (First 263 order) and further we note that the Second Ld. Pr. CIT while issuing the Show Cause Notice while exercising his revisional jurisdiction for second time has not made even a single allegation about the non-compliance/failure on the part of Second AO in respect of the specific direction given by the First Ld. Pr. CIT dated 23.08.2016 while setting aside the original assessment order passed by the AO dated 26.03.2016. In other words, in the impugned order the second Ld. Pr. CIT has not found fault with the action of the second AO in giving effect to the specific directions given by him while passing the first revisional order on 23.08.2016. Thus, we note that when the second AO while framing the reassessment order pursuant to the specific direction of the First Ld. Pr. CIT's order dated 23.08.2016 (first revisional order) has complied with the specific directions of the First Ld. Pr. CIT and based on the inquiry conducted and after perusal of the documents running more than 352 pages which reveals the identity, creditworthiness and genuineness of the share capital and premium collected by the assessee from the share subscribers, the satisfaction of AO as envisaged in sec. 68 of the Act is a plausible view and the fact that the share subscribers responded to sec. 133(6) notice and produced all documents along with the audited financial statements and other documents referred supra, the assessee had discharged the onus upon it about the identity creditworthiness and genuineness of the share capital and premium collected by the assessee from the respective share subscribers. Since the aforesaid exercise was carried out by the second AO in the reassessment proceedings and the documents referred to above are in the assessment folder, the Second Ld. Pr. CIT erred in holding the reassessment order of the AO in respect of share capital and premium Page 39 of 49

I.T.A. No.: 495/KOL/2022 Assessment Year: 2012-2013 M/s. Pearl Tracom Pvt. Ltd. collected by the assessee as erroneous as well as prejudicial to the interest of the revenue. In the light of the aforesaid discussions and on perusal of the documents, we are of the view that AO's view to accept the identity, creditworthiness and genuineness of the share capital and premium collected from the share subscribers was a plausible view and at any rate can be termed as an unsustainable view on law or facts 55. Further, we also take note that while he proposed to interfere u/s. 263 of the Act, he had opined that there was no detailed or independent enquiry but finally concluded that there was lack of enquiry. So, the Ld. Second Pr. CIT accepts that there was enquiry made by the second AO, however, he concludes that there was lack of enquiry. So when there was an enquiry conducted by AO then the AO has discharged the duty of an investigator. And we note that all the documents referred to above are available is the assessment folder before the Second Ld. Pr. CIT and he could have easily examined the veracity of these documents from the department's data base by click of a mouse and could have recorded his finding of fact if he found anything wrong with these share subscribers and could have pointed out the adverse fact, if any, which the Second Ld. Pr. CIT has not made in the impugned order. So the inference that can be drawn is that the veracity of the factual contents of the documents running more than 352 pages (PB-2) could not be factually controverted by the Second Ld. Pr. CIT. And still if the Ld. Pr. CIT is not satisfied and wanted to interfere invoking jurisdiction u/s. 263 of the Act, he has to show that the enquiry conducted by AO was flawed or the enquiry conducted by AO was on a wrong direction or on wrong assumption of fact/law or that the AO misdirected himself in factual investigation or applied the law erroneously in respect of the facts collected by him. For doing so, in the facts discussed supra, he second [Ld. Pr. CIT) should himself had conducted an enquiry or at least conducted a preliminary enquiry and was able to bring some evidence/material on record to upset the AO's satisfaction in respect of identity, creditworthiness or genuineness of the share subscribers and thus recorded a finding of fact that the decision of AO's enquiry was faulted or wrong and in that process tried to show that it has resulted in a view which is "unsustainable in law" which would have justified his action of passing the impugned order u/s. 263 of the Act, which unfortunately is not the case. Since the AO's view on the facts collected and discussed is definitely a possible view, so in the factual background discussed in detail, we are of the considered opinion that Ld. second Pr. CIT ought not to have interfered with the AO's Page 40 of 49

I.T.A. No.: 495/KOL/2022 Assessment Year: 2012-2013 M/s. Pearl Tracom Pvt. Ltd. reassessment order which in any case can be classified as 'unsustainable in law' since it is in line with plethora of judicial decisions of the subject. 56. To sum up, we find from the above said facts that the Second AO has conducted enquiry as directed by the First Ld. Pr. CIT on the specific subject matter i.e. share capital and premium collected by the assessee-company. Therefore, the finding of Second Pr. CIT that the Second AO has not conducted enquiry is incorrect and is flowing from suspicion only. And as discussed, the allegation/fault pointed out by the Second Ld. Pr. CIT that the Second AO failed to collect total facts also cannot be accepted for the simple reason that Ld. Pr. CIT has not spelt out in the impugned order what he meant by total facts or in the alternative when the assessee has discharged its onus, as required by the law in force in this AY 2012-13, then the Ld. Pr. CIT ought to have called for which ever additional documents/materials or issued summons or issued notices and collected those facts which according to Second Ld. Pr. CIT, the AO omitted to collect and then demonstrated that those actions/documents which he collected in that process gave result to a different finding of fact which will turn upside down the claim of the assessee and thus able to show that the actions/omission of AO in conducting the investigation was erroneous, which unfortunately is not the case before us. And equally bad is the bald allegation/fault that second AO has not collected total facts cannot be accepted being vague and based on conjectures and surmises and so meritless. Since the assessee company has discharged its onus as discussed supra, and still if the Second Pr. CIT had to find the order of Second AO erroneous for lack of enquiry or for not collecting the entire facts, then the Second Pr. CIT ought to have called for the additional facts which he thinks that the Second AO has not collected from the assessee or the shareholders and then explained in his impugned order as to what effect those additional documents would have made on the second assessment order/reassessment order or in other words the impact on the decision making process of framing the second assessment order due to the failure of second AO's omission to collect the additional documents. However, we note that the Second Pr. CIT has not carried out any such exercise or even spelled out in his impugned order, which all documents the second AO failed to collect for considering the total facts; and even if we presume he has conducted such an exercise, then he has not been able to bring out any adverse factual finding to upset the view of Second AO. So we find no merit in the vague allegation of second Pr. CIT that the second AO has not collected the full facts necessary to Page 41 of 49

I.T.A. No.: 495/KOL/2022 Assessment Year: 2012-2013 M/s. Pearl Tracom Pvt. Ltd. decide the issue of share capital & premium. So we note that the Second AO, the assessing authority who is a quasi- judicial office has discharged his dual role as an investigator as well as an adjudicator. Looking from another angle of doctrine of merger canvassed before us, we note from the facts of this case that the second Ld. Pr. CIT - 4 by passing the second revisional order dated 14.03.2019 has substituted the First Pr. CIT's order passed u/s. 263 of the Act dated 23.08.2016 with his own order which he cannot do since the second assessment order/re-assessment of the Second AO dated 07.12.2016 was pursuant to the first revisional order of the First Ld. Pr. CIT and on the very same subject matter on which specific directions/instructions were given by the First Ld. Pr.CIT, which direction since having been complied by the AO, brings into operation the doctrine of merger the subject matter i.e. share capital & premium collected by assessee company. Resultantly the second Ld. Pr.CIT, again cannot rake-up the same subject matter without the second Ld. Pr.CIT in the second revisional order spells out where the error happened to second AO as an investigator or adjudicator, which exercise the Second Ld. Pr.CIT has not done, so the second Ld. Pr. CIT cannot be permitted to again ask the AO to start the investigation in the way he thinks it proper on the very same subject on which merger has taken place by virtue of the order of First Ld. Pr. CIT. And if this practice is allowed, then there will be no end to the assessment proceedings meaning no finality to assessment proceedings and that is exactly why the Parliament in its wisdom has brought in safe- guards, restrictions & conditions precedent to be satisfied strictly before assumption of revisional jurisdiction. Be that as it may be, as discussed above, we find that the Second Ld. Pr. CIT without satisfying the condition precedent u/s 263 of the Act has invoked the revisional jurisdiction (second time), so all his actions are ab initio void." 13. In the case on hand, the Assessing Officer has at page 5, considered the specific directions given by the Id. CIT[A) in his order u/s 263 of the Act dt. 23/08/2016 and based on the same had issued questionnaires to the assessee company which is in Annexure-A of the assessment order. Summons were issued u/s 131 of the Act to the directors of the share holding company M/s. Lakshmi Dealmark Private Limited. The actions taken in compliance with the directions given by the Id. Pr. CIT are given at page 5 to 7 of the assessment order. A perusal of the same demonstrates that the directions were carried out. This is not a case of non¬applicability of mind or non- verification. The Assessing Officer has taken a possible view. When Page 42 of 49

I.T.A. No.: 495/KOL/2022 Assessment Year: 2012-2013 M/s. Pearl Tracom Pvt. Ltd. the Assessing Officer follows the direction of the Id. Pr. CIT, in his order passed u/s 263 of the Act, no revision can be done u/s 263 of the Act on the ground that the Assessing Officer has not travelled beyond these directions. 14. The Hon'ble Delhi High Court in the case of CIT vs. K.L. Ahuja (supra), has approved the following observations of the Tribunal:- "When the Income-tax Officer passes an order in his own discretion and that order is found to be erroneous or prejudicial to the interests of the Revenue under is the power to the Commissioner of Income-tax to rectify it but when an Income-tax Officer passes an order not in his own discretion or wisdom but following the directions of the Commissioner of Income-tax who follows in turn the direction of the Central Board of Direct Taxes, to whom both’ of them are subordinate, the Commissioner of Income-tax who succeeds the Commissioner of Income-tax who had issued the impugned instructions in a circular letter to the Inspecting Assistant Commissioner cannot treat the order of the Income-tax Officer as erroneous or prejudicial to the interests of the Revenue because it would in fact amount to reviewing his predecessor's order which is not permissible under. We accordingly hold that the impugned order passed by the learned Commissioner of Income-tax was without jurisdiction. Under the circumstances, we cancel the said order." 15. Applying the propositions of law laid down in the case-law referred above to the facts of the case, we have to necessarily hold that the exercise of the revisionary powers by the Id. Pr. CIT u/s 263 of the Act vide order dt. 21/02/2020, is bad in law. Hence, we quash the same. 16. In the result appeal of the assessee is allowed. 4. Consistent with the view taken therein, we hold that the exercise of the revisionary powers by the Id. Pr. CIT u/s 263 of the Act vide order dt. 31/01/2020, is bad in law. Hence, we quash the same. 5. In the result appeal of the assessee is allowed.” 19. We notice that the issues raised in the instant appeal and facts brought before us are almost identical to the issues dealt by this Tribunal in the case of Bhagwati Vintrade Private Limited (supra) and this decision of this Tribunal was challenged by the Page 43 of 49

I.T.A. No.: 495/KOL/2022 Assessment Year: 2012-2013 M/s. Pearl Tracom Pvt. Ltd. Revenue before the Hon'ble Jurisdictional High Court but Revenue failed to succeed as the decision of this Tribunal stands confirmed by the Hon'ble Jurisdictional High Court observing as follows:

“The Court This appeal filed by the revenue is directed against the order dated 17.02.2021 passed by the Income Tax Appellate Tribunal, “A” Bench, Kolkata (Tribunal) in ITA No. 303/Kol/2020 for the assessment year 2013-2014. The revenue has raised the following substantial questions of law for consideration : i) Whether the Learned Tribunal has committed substantial error in law by not upholding the order passed under section 263 of the Income Tax Act, 1961 by Principal Commissioner of Income Tax as because the assessment order passed by the assessing officer is erroneous and so far as prejudicial to the interest of the Revenue? ii) Whether the Learned Tribunal has committed substantial error in law by holding that the revisionaiy power of PCIT under Section 263 of the Income Tax Act, 1961 is bad in law and quashing the same, whereas the Honhle Apex court in the matte of Rampyari Devi Sarogi Vs. CIT (1968) 67 ITR 84 (SC) AND Tara Devi Agarwal - Vs. CIT (1973) 88 ITR 323 (SC) held that in absence of proper enquiries the assessment order would become erroneous and prejudicial to the interest of the Revenue? iii) Whether the Learned Tribunal has committed substantial error in law in quashing the order under section 263 of the Act of PCIT dated 21.02.2020 whereas Apex Court in the case of Pr. CIT -Vs - NRA Iron Steel Pvt. Ltd. held that the practice of conversion of unaccounted money through the cloak of share capital and premium must be subjected to careful scrutiny? We have heard Mr. Samarjit Roychowdhury, learned standing Counsel along with Mr. Soumen Bhattacharjee for the appellant and Mr. S.M. Surana, learned Counsel duly assisted by Mr. Sengupta, learned Advocate for the respondent. On perusal of the order passed by the learned Tribunal we find that the finding recorded by the learned Tribunal is fully justified. We support such conclusion with the following reasons:

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I.T.A. No.: 495/KOL/2022 Assessment Year: 2012-2013 M/s. Pearl Tracom Pvt. Ltd. The present proceeding arising out of the second round of proceedings under Section 263 of the Act. The learned Tribunal has carefully considered the factual position and noted that assessing officer has followed the direction issued in the earlier order passed by the Section 263 of the Act. The Assessing Officer has issued summons under Section 131 of the Act to the directors of the Shareholding Company M/s. Laxmi Timber Pvt. Ltd. in consonance with the direction issued by the Principal Commissioner of Income Tax under Section 263 of the Act. This finding would be seen from paragraphs 5 to 7 of the assessment order. Thus the learned Tribunal on re-verification of the facts found that this is not a case of non application of mind nor this is a case of failure to re-appreciate the facts and concluded that the view taken by the assessing officer was a plausible view. That apart we note that the assessing officer conducted thorough enquiry and has also examined the directors of the holding company. Thus the learned Tribunal rightly dismissed the appeal filed by the revenue. Considering the facts and circumstances of the case we find that there is no question of law much less substantial question of law arising for consideration in this appeal. Accordingly, the appeal fails and dismissed.” 20. The above judgment of Hon'ble Jurisdictional 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: “7. We have heard rival submissions, carefully perused the material available on record, the impugned appellate order, the assessment order passed in the set aside proceeding and the decision cited before us in the case of Omkar Infracon (P) Ltd. (supra) and the decision of jurisdictional High Court in the case of PCIT Vs Bhagwati vintrade Pvt Ltd(supra). We observe on the basis of the records before us that Ld. Pr. CIT has revised the assessment on the ground lack of enquiry on the part of the AO into the issue of investment of share capital and share premium. However, we note that in the set aside assessment proceeding in the first inning the AO examined the issue in detail after calling information from the assessee as well as investors u/s 133(6)

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I.T.A. No.: 495/KOL/2022 Assessment Year: 2012-2013 M/s. Pearl Tracom Pvt. Ltd. of the Act and based on that detailed enquiry on the issue accepted the investments made in the assessee company. The relevant findings of the AO in the assessment order as framed u/s 143(3) r.w.s. 263 of the Act are reproduced as under: “And considering the facts and circumstances of case as discussed above and as per submission of assessee, the assessment order was passed without making inquiries and verification which would have been made and therefore the order was passed on 13.03.2015 stands erroneous in so far as prejudicial to the interest of revenue and is set aside de novo with direction to AO to carry out proper examination of books of accounts including bank accounts of assessee as well as investors. AO is also directed to examine of credit appearing in the books of assessee as share capital including premium and nature of transactions, identity of investor and its genuineness. As directed by the Principal Commissioner of Income Tax-4, Kolkata in the order u/s. 263 as above notice u/s. 142(1) of the I. T. Act, 1961 was issued and served on the assessee on 12.07.2016 asking to produce relevant papers and documents. In response to notice u/s. 142(1) Sri Rajesh Kumar Agarwal, Director of the assessee company appeared time to time along with papers and documents as required to discuss the case. To ensure genuinity of transactions of the shareholder companies further notices u/s. 133(6) of the I. T. Act, 1961 were issued on 12.07.2016 to the parties from whom funds were received to the shareholder companies as source of investment in the assessee company. Replies were received from all the parties proving identity of parties, genuinity of the transactions and again it was observed that all the transaction were made through banking channel and duly recorded in the books of accounts of the parties. Accordingly it is inferred that (i) As the shareholders are private limited companies and registered with the Ministry of Corporate Affairs they have an estabslished identity. (ii) Details of source of funds have been submitted by all the shareholders. (iii) None of applicants have been made otherwise than by banking channels.

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I.T.A. No.: 495/KOL/2022 Assessment Year: 2012-2013 M/s. Pearl Tracom Pvt. Ltd. (iv) All the investors have submitted their Annual reports and I. T. Returns. (v) In all the cases the investments is duly reflected in the Annual Accounts of the investor. (vi) Moreover, summon u/s. 131 was also issued to the director of the company. In response to the summon u/s. 131 the director of the company appeared and give statement along with relevant papers. In view of the above observations, the total income of the assessee is computed as per separate computation sheet attached. Assessed u/s. 264/143(3) for a total income of Rs. NIL.” 8. 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. Considering the above facts, we are of the view that the jurisdiction u/s. 263 of the Act by Ld. Pr. CIT has not been validly exercised. The case of the assessee finds support from the decision of the coordinate bench in Omkar Infracon (P) Ltd. (supra) wherein under similar facts, wherein the show cause notice is verbatim same, the coordinate bench has held the second revision as invalid by upholding the assessment order passed in the first inning. Recently the Hon’ble Calcutta High Court has held in the case of PCIT Vs Bhagwati Vintrade Pvt. Ltd ITAT/184/2022, IA No. GA/2/2022 dated 18.1 1.2022 that “the present proceeding arising out of the second round of proceedings under section 263 of the Act. The learned Tribunal has carefully considered the factual position and noted that assessing officer has followed the direction issued in the earlier order passed by the Section 263 of the Act. The Assessing Officer has issued summons under Section 131 of the Act to the directors of the Shareholding Company M/s Laxmi Timber Pvt. Ltd. in consonance with the direction issued by the Principal Commissioner of Income Tax under Section 263 of the Act. This finding would be seen from paragraphs 5 to 7 of the assessment order. Thus the learned Tribunal on re-verification of Page 47 of 49

I.T.A. No.: 495/KOL/2022 Assessment Year: 2012-2013 M/s. Pearl Tracom Pvt. Ltd. the facts found that this is not a case of non-application of mind nor this is a case of failure to reappreciate the facts and concluded that the view taken by the assessing officer was a plausible view. That apart we note that the assessing officer conducted thorough enquiry and has also examined the directors of the holding company. Thus the learned Tribunal rightly dismissed the appeal filed by the revenue.” 9. 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. 10. In the result, the appeal of assessee allowed.” 21. 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. 22. Under these given circumstances, we are of the considered view that ld. Pr. CIT grossly erred in assuming the jurisdiction u/s

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I.T.A. No.: 495/KOL/2022 Assessment Year: 2012-2013 M/s. Pearl Tracom Pvt. Ltd. 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 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. 23. In the result, the appeal filed by the assessee is allowed. Kolkata, the 6th March, 2023 Sd/- Sd/- [Rajpal Yadav] [Manish Borad] Vice President Accountant Member Dated: 06.03.2023 Bidhan (P.S.) Copy of the order forwarded to: 1. M/s. Pearl Tracom Pvt. Ltd., C/o. M/s Salarpuria Jajodia & Co., 7, C. R. Avenue, 3rd Floor, Kolkata. 2. PCIT-4, Kolkata. 3. CIT(A)- 4. CIT- 5. CIT(DR), Kolkata Benches, Kolkata. //True copy // By order

Assistant Registrar ITAT, Kolkata Benches Kolkata

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