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Income Tax Appellate Tribunal, JAIPUR BENCHES ‘A’ JAIPUR
Before: SHRI SANDEEP GOSAIN, JM & SHRI VIKRAM SINGH YADAV, AM vk;dj vihy la-@ITA No. 288/JP/2020
आयकर अपीलीय अधिकरण] जयपुर न्यायपीठ] जयपुर IN THE INCOME TAX APPELLATE TRIBUNAL, JAIPUR BENCHES ‘A’ JAIPUR Jh lanhi xkslkbZ] U;kf;d lnL; ,oa Jh foØe flag ;kno] ys[kk lnL; ds le{k BEFORE: SHRI SANDEEP GOSAIN, JM & SHRI VIKRAM SINGH YADAV, AM vk;dj vihy la-@ITA No. 288/JP/2020 fu/kZkj.k o"kZ@Assessment Year :2015-16 cuke M/s Rajendra and Ursula Joshi Skill Principal Vs. Development P. Ltd. Jaipur Commissioner of Income Tax-2, Jaipur LFkk;h ys[kk la-@thvkbZvkj la-@PAN/GIR No. AAGCR4665R vihykFkhZ@Appellant izR;FkhZ@Respondent fu/kZkfjrh dh vksj ls@ Assessee by : Sh. Rohan Sogani (CA) & Sh. Rajeev Sogani (CA) jktLo dh vksj ls@ Revenue by : Sh. Amrish Bedi (CIT) lquokbZ dh rkjh[k@ Date of Hearing : 09/12/2020 mn?kks"k.kk dh rkjh[k@Date of Pronouncement: 02/03/2021 vkns'k@ ORDER
PER: VIKRAM SINGH YADAV, A.M. This is an appeal filed by the assessee against the order of ld. Pr. CIT-2, Jaipur dated 23.03.2020 u/s 263 of the Act pertaining to Assessment Year 2015-16.
Briefly stated, the facts of the case are that the assessee company filed its return of income declaring total income of Rs. 2,00,71,040/-. The matter was selected for complete scrutiny under CASS, the notice u/s 143(2) was issued to the assessee and assessment was completed accepting the returned income. Subsequently, the assessment records were called for by the ld. Pr. CIT-2, Jaipur and a show cause notice u/s
2 ITA No. 288/JP/2020 M/s Rajendra and Ursula Joshi Skill Development P. Ltd. Jaipur Vs. Pr. CIT-2, Jaipur 263 dated 28.02.2020 was issued and after considering the submissions of the assessee, the order passed by Assessing Officer u/s 143(3) was held to be erroneous and prejudicial to the interest of the Revenue and was set aside to be made afresh, after giving opportunity to the assessee. Against the said order and findings of the ld. Pr. CIT-2, Jaipur, the assessee is in appeal before us.
At the outset, we refer to the show cause notice dated 28.02.2020 issued by the ld Pr CIT and contents thereof read as under:- “3. On perusal of the assessment record, it is noticed that in the year under reference there is an increase in authorised share capital as well as issued and subscribed capital from Rs. 57,50,00,000/- as on 31.03.2014 to Rs. 1,77,50,00,000/- showing an increase of rupees 120 crore during the year under consideration.
It is seen that before completing the assessment, AO has not verified the source of increase in share capital, though this was one of the reasons for selection for complete scrutiny in as much as there is no PAN/ITR details or confirmations of the persons from whom Rs. 120 crore has been received nor the source of money in the hands of the above persons was inquired into.
It is seen that the company was incorporated on 24.06.2013. No Revenue from operations is shown in the year under reference and so in earlier year. AO did not make any inquiries to ascertain if the business of the assessee company got setup or not. However AO has allowed claim of business loss amounting to Rs. 56,52,325/- without looking into this aspect.
3 ITA No. 288/JP/2020 M/s Rajendra and Ursula Joshi Skill Development P. Ltd. Jaipur Vs. Pr. CIT-2, Jaipur 6. It is also found that you have not filed From No. 15CA during assessment proceedings which contained mandatory information of the remitter, remittee, the accountant signing the certificate, particular of remittance and TDS, taxability under the provision of the Act, any claim of relief under DTAA etc. In absence of the Form No. 15CA outward remittances to non-resident, receipts of large value foreign remittances as compared to business income have not been verified though this was also one of the reasons for selection of the case under scrutiny.
It is also noticed that there is an increase in tangible assets but no details are available in note- 6 to the accounts. AO also failed to verify purchase of fixed assets amounting to Rs. 63.25 Cr made during the year.
In view of the above, it appears that the assessment order passed under section 143(3) of the I.T Act 1961 in your case for A.Y 2015-16 on 13.12.2017 is erroneous in as far as it is prejudicial to the interest of Revenue.”
On each of the four issues raised by the ld Pr CIT in the show cause notice, we now refer to the contentions advanced by both parties.
The ld. AR submitted that the records relating to any proceedings against the assessee as well as inquiries u/s 263 of the Act needed to be considered for deciding whether the order passed by the Assessing Officer is erroneous and prejudicial to the interest of the Revenue. It was submitted that the ld. Pr. CIT did not dispute the said legal proposition, however, failed to consider sufficient material which were available on record in terms of inquiries conducted by the Assessing Officer during the
4 ITA No. 288/JP/2020 M/s Rajendra and Ursula Joshi Skill Development P. Ltd. Jaipur Vs. Pr. CIT-2, Jaipur assessment proceedings u/s 143(3) of the Act, inquiries during proceedings u/s 133(6) by the Assessing Officer, inquiries by DDIT(Investigation) in the case of Dr. Rajendra Kumar Joshi, inquiries done by the Enforcement Directorate and the inquiries done by ld. Pr. CIT during proceedings u/s 263 of the Act. It was submitted that the conclusion of the ld. PCIT that assessment order lacked inquiry is therefore absolutely unjustified and contrary to the facts available on record.
It was submitted that the assessment order can be revised u/s 263 only if the twin conditions of error in the order and prejudice cause to the Revenue coexist and reliance was placed on the Hon’ble Supreme Court decision in the case of Malabar Industrial Co. Ltd [2000] 109 Taxman 66 (SC). It was submitted that from the exhaustive material available on record and different enquiries made by various authorities including by the ld Pr CIT, it is abundantly clear that no prejudice, in any manner was caused to the interest of the Revenue. It was submitted that in absence of any prejudice to the interest of the Revenue, any assumption of jurisdiction u/s 263 is unjustified.
It was further submitted that with all the exhaustive material available on record before the ld. Pr. CIT, he was duty bound to refer to the same and then come to the conclusion that the order of the AO was erroneous and prejudicial to the interest of the Revenue, instead, the ld. Pr. CIT simply gave directions to the ld. AO to decide the matter afresh.
It was submitted that the shares amounting to Rs. 120 crores were allotted to the same shareholders to whom share capital amounting to Rs. 57.50 crores stood allotted in the preceding A.Y 2014-15, the
5 ITA No. 288/JP/2020 M/s Rajendra and Ursula Joshi Skill Development P. Ltd. Jaipur Vs. Pr. CIT-2, Jaipur assessment in respect of which stood completed u/s 143(3) dated 18.12.2016. It was submitted that the shareholders and their source remaining the same, the inquiry conducted by the Assessing Officer in the year under consideration, was justified and cannot be said to be lacking. It was submitted that the assessment for A.Y 2016-17 was completed u/s 143(3) dated 20.12.2018 wherein there is an increase in share capital by Rs. 76.50 crores and no adverse inference with respect to the issues taken up by ld. Pr. CIT in the present case were drawn by the Assessing Officer. Similarly, it was submitted that the assessment for A.Y 2017-18 has been completed by the Assessing Officer u/s 143(3) dated 27.12.2019 wherein also there is an increase in share capital by Rs. 90 crores and no adverse inference has been drawn by the Assessing Officer.
It was further submitted that the ld. PCIT has placed reliance on the decision of Hon’ble Bombay High Court, in the case of ALD Automotive (P.) Ltd. [2018] 91 Taxmann.com 475 (Bombay), for the proposition that the business of the assessee company had not been set up and thus, the assessee company was not entitled to claim business loss in the year under reference. It was submitted that the facts of the case, relied upon by ld. PCIT, are totally different from the facts of the case at hand. In the case of ALD Automotive (P.) Ltd. (supra), the assessee had grossly failed to produce necessary evidences to prove that its business was set up. In the said case, all that assessee company had incurred, as part of its expenses, was the school fees of the children of Director, rent paid for Director’s residence, and the brokerage on the same whereas, in the case at hand, the assessee company had already incurred salary expenses for its employees, expenditure on training of such employees, for the purpose of them being able to subsequently impart training for skill development, being the main object of the assessee company. For such purpose, two of
6 ITA No. 288/JP/2020 M/s Rajendra and Ursula Joshi Skill Development P. Ltd. Jaipur Vs. Pr. CIT-2, Jaipur its employees were sent to Austria for getting training on Skill Development and these facts were even admitted by the ld. PCIT in her order.
It was further submitted that the ld PCIT has observed certain errors/lack of enquiry, in the Assessment Order, at Para 5.1 to 5.4 of her order. At Para 5.1, Page 4 of the order, ld. PCIT has held the lack of meeting of Board of Directors for allotment of equity shares. At Para 5.4, Page 4 of the order, it is pointed out that it is not clear as to what kind of training was imparted to these employees. At Para 5.4, Page 5 of the order, the reference of no business revenue being generated to make it a case of non-commencement of business. At Para 5.4, Page 5 of the order, it has been mentioned that no clearances/licenses has been obtained from the regulatory authorities to start the courses. It was submitted that Section 263 proceedings are not meant for correcting each and every error of the ld. AO. Moreover, the issues as pointed above are not at all relevant for the ld. AO to reach to the conclusion and in support, reliance was placed on decision of Coordinate Bench in case of Torrent Pharmaceuticals Ltd. [2018] 173 ITD 130 (Ahd).
It was accordingly submitted that in view of the above factual and legal position, the ld Pr.CIT has grossly erred in assuming jurisdiction under section 263 of the Act and the order so passed therefore may be set-aside.
Per contra, the ld. Pr.CIT/DR submitted that the case of the assessee was selected under complete scrutiny under CASS and one of the reasons was substantial increase in share capital and after going through the details submitted by the assessee during the assessment proceedings
7 ITA No. 288/JP/2020 M/s Rajendra and Ursula Joshi Skill Development P. Ltd. Jaipur Vs. Pr. CIT-2, Jaipur vide Annexure– C of letter dated Nil wherein the name of the share holders have been mentioned and the value of share allotment during the month of December, 2014, January, 2015 and March, 2015 are only mentioned, the ld. Pr. CIT has given a finding that no details of PAN/ITR of the persons from whom amount of Rs. 120 Cr. was received by the assessee was enquired and is not there on the record apart from source of investment by these entities. It was further noted that there is a credit entry of Rs. 30 Cr. on 06.12.2014 and of another Rs. 30 Cr. on 21.01.2015 in the bank account of the assessee company though assessee company received share capital of 10 Cr. each from Jayant Joshi, Jalaj Joshi and Nayan Joshi in December, 2014 and January, 2015. In the bank account of the assessee company credit is not reflected in the name of the three individuals but a consolidated credit entry of Rs. 30 cr. each is seen. The AO did not verify these details and did not enquire into source of money in the hands of these individuals. There are no other documentary evidences on record seeking allotment of equity shares by these entities, meeting of the board of directors authorizing allotment of equity share to these entities. It was submitted that the ld Pr CIT has rightly held that afer the proviso was inserted to section 68 of the I.T. Act by the Finance Act, 2012 with effect from 01.04.2013, the AO ought to have enquired about the source of the amounts so credited/invested along with documentary evidence, which AO failed to do so in the instant case.
In respect of other issues raised in the show-cause notice, our reference was drawn to the following findings of the ld Pr CIT which read as under:
“5.2 It is seen from the balance sheet that tangible assets are shown at Rs. 46,58,48,239/- as per the details given in note-6 but
8 ITA No. 288/JP/2020 M/s Rajendra and Ursula Joshi Skill Development P. Ltd. Jaipur Vs. Pr. CIT-2, Jaipur no note-6 is appended thereto and no details in respect of the fixed assets is available on record. It is also noted that capital work in progress has increased from Rs. 2.24 Cr. to Rs. 32.49 Cr. under the head construction of building but no details in respect thereof are there on record. AR has furnished the details vide letter dated 09.03.2020 which may be verified by the AO. 5.3 In the year under reference there is large outward foreign remittance towards purchase of machinery. AR submitted Form No. 15CA vide reply dated 09.03.2020 which may be verified by the AO. 5.4 It is seen that the company was incorporated on 24.06.2013 with the main objective of establishing, promoting and running of skill development campus for different trades. It is submitted that the assessee hired employees and their training commenced to enable them to impart skill development training. Assessee incurred salary expenditure of Rs. 21,69,785/- and expenditure on their training of Rs. 4,13,608/-. It is noted that assessee has debited staff recruitment expenses of Rs. 1,15,274/- which includes Rs. 1,01,124/- paid to Right Step Consulting Pvt. Ltd. vide invoice dated 26.03.2015 for recruiting Felix Charlesworth Expenditure on their training is basically the travel expenses paid to Apple Tools Pvt. Ltd. It is not clear as to what kind of training was imparted to these employees. Apart from this, it is also noted that the building/campus is still under construction and the machinery which were imported for the purpose of imparting the training were yet to be installed. This is evident from note — 5 of Notes to the financial statements for the year. “Depreciation on Fixed Assets is provided for on the basis of written down value (WDV) method based on useful life of the
9 ITA No. 288/JP/2020 M/s Rajendra and Ursula Joshi Skill Development P. Ltd. Jaipur Vs. Pr. CIT-2, Jaipur assets as prescribed in the Schedule II the Companies Act, 2013. Plant & Machineries were purchased during the end financial year 2014-15 and installations of the same were completed during the financial year 2015-16, therefore no depreciation has been charged on the same for the financial year 2014-15."
It is important to ascertain the previous year if any income is to be assessed under the head income from business or profession. The previous year is defined in section 3 as under:
"For the purpose of this Act, "previous year" means the financial year immediately preceding the assessment year.
Provided that, in the case of a business or profession newly set up, or a source of income newly coming into existence, in the said financial year, the previous year shall be the period beginning with the date of setting up of the business or profession or, as the case may be, the date on which the source of income newly comes into existence and ending with the said financial year"
From the above it is clear that in order to assess an income / loss there should be previous year and the previous year begins from the date of setting up of the business. The assessee company was incorporated on 24.06.2013 with the main objective "To establish, acquire, promote, run, or in any other manner carry o in India the business of a skill development campus for different trades, equipped with all needed machines and facilities to impart practical skill combined with trade related theoretical education." It is seen that there was no business Revenue in the year under reference and also in the preceding year from the date of incorporation. No training program as such has been conducted so far. The campus /
10 ITA No. 288/JP/2020 M/s Rajendra and Ursula Joshi Skill Development P. Ltd. Jaipur Vs. Pr. CIT-2, Jaipur building is under construction and WIP as on 31.03.2015 is shown at 32.49Cr. Assessee imported certain machineries for imparting training which were not installed till 31.03.2015. Assessee has recruited certain personnel in December, 2014 onwards. It seems that two of the personnel were given training in Austria for which only travel expenses were borne by the company. There is no detail on record if the company had obtained necessary clearances / licenses as required from the regulatory authorities to start the courses and if any broad outlines / curriculum of the courses to be imparted were drafted/ conceived. It seems that this program has eventually been carried forward by setting up a separate university by the assessee. It is seen that AO did not carry out any inquiry/verification to determine if the business of the assessee got setup and it was ready to commence before allowing the claim of business loss in the year under reference. Reliance in this regard can be placed on the decision of Hon'ble Bombay High Court given in the case of ALD Automotive (P.) Ltd. v. Deputy Commissioner of Income-tax-IS(1) [2018] 91 taxmann.com 475 (Bombay) in which Hon'ble High Court has affirmed the decision of Hon'ble ITAT denying the business loss on the ground that no business was set-up in the previous year though the appellant had purchased two vehicles and also taken office on hire. Assessee has placed reliance on the decision of Hon'ble Gujrat High Court in the case of Sarrashtra Cement and Chemical Industries Ltd. v. CIT [1973] 91 ITR 170 (Guj-HC). It is seen that in this case mining lease as well as license to establish a cement manufacturing plant was available, quarrying operations for extracting limestone from the leased area had started and installation of plant and machinery was completed in June, 1960 and manufacturing itself
11 ITA No. 288/JP/2020 M/s Rajendra and Ursula Joshi Skill Development P. Ltd. Jaipur Vs. Pr. CIT-2, Jaipur had started in October, 2016. Further the issue of setting up of business is to be largely determined by the facts of each case. AO is directed to verify necessary details as mentioned above with regard to setting up of business which is essential for allowing the business loss.
Regarding the contention of the ld AR that the records relating to any proceedings against the assessee as well as inquiries u/s 263 of the Act needed to be considered for deciding whether the order passed by the Assessing Officer is erroneous and prejudicial to the interest of the Revenue, the ld CIT/DR submitted that there is no dispute that the entire material including material collected during the course of revisionary proceedings needs to be considered. However, given the fact that it is a case where the order has been passed by the AO without making inquiries and verification which should have been made and allowing relief of losses without enquiring into the claim, the ld Pr CIT has rightly held that the order so passed by the AO is deemed to be erroneous in so far as prejudicial to the interest of the Revenue in terms of explanation to section 263 and the matter has been set-aside to the file of the AO where the AO same examine all the relevant material available on record and after providing reasonable opportunity, shall decide the matter afresh.
We have heard the rival contentions and perused the material available on record. We find that the return of income was selected for complete scrutiny under CASS and the reasons for such selection interalia includes substantial increase in share capital which is one of the issues raised by the ld Pr CIT in the show-cause notice and a subject matter of present dispute.
12 ITA No. 288/JP/2020 M/s Rajendra and Ursula Joshi Skill Development P. Ltd. Jaipur Vs. Pr. CIT-2, Jaipur 16. Undisputedly, there is an increase in share capital during the year under consideration wherein additional shares amounting to Rs 120 crores have been allotted by the assessee company to its existing shareholders to whom shares amounting to Rs 57.50 crores were also allotted during the preceding year relevant to assessment year 2014-15. It is also a fact that the assessment for A.Y 2014-15 was completed u/s 143(3), however, there is nothing on record or brought to the notice of the Bench in terms of whether matter relating to increase in share capital was subject matter of examination by the AO for the said assessment year. In any case, where the shares have been allotted even to existing shareholders, the question that arise for consideration is whether it is incumbent on part of the AO to enquire about source of fresh funds to the tune of Rs 120 crores infused by way of share capital during the year especially where the same is one of the reasons for selection of case under complete scrutiny. To our mind, the answer to the same is clearly in the affirmative as the AO is under a statutory obligation to examine the said transaction qua the source of funds infused during the year under consideration and record his findings and failure to carry out such examination and verification of a matter which is subject matter for selection of case for scrutiny will clearly render the order erroneous and prejudicial to the interest of Revenue.
Further, the ld Pr CIT has referred to the provisions of section 68 of the Act which reads as under: “Where any sum is found credited in the books of an assessee maintained for any previous year, and the assessee offers no explanation about the nature and source thereof or the explanation offered by him is not, in the opinion of the Assessing Officer, satisfactory, the sum so credited may be charged to income-tax as the income of the assessee of that previous year
13 ITA No. 288/JP/2020 M/s Rajendra and Ursula Joshi Skill Development P. Ltd. Jaipur Vs. Pr. CIT-2, Jaipur Provided that where the assessee is a company (not being a company in which the public are substantially interested), and the sum so credited consists of share application money, share capital, share premium or any such amount by whatever name called, any explanation offered by such assessee-company shall be deemed to be not satisfactory, unless— (a) the person, being a resident in whose name such credit is recorded in the books of such company also offers an explanation about the nature and source of such sum so credited; and (b) such explanation in the opinion of the Assessing Officer aforesaid has been found to be satisfactory.”
The provisions of section 68 therefore have rightly been held by the ld Pr CIT to be attracted in the instant case and it is for the assessee company to offer an explanation about the nature and source of such funds introduced by way of share capital and in addition, the shareholders of the assessee company are also required to offer an explanation about the nature and source of share capital so introduced in the assessee company, a company in which public is not substantially interested and the AO is required to record his satisfaction about the explanation so offered. Where there is a failure to offer such explanation on part of the assessee and its shareholders and it would be incumbent on part of the AO to seek such an explanation and where the AO has not sought such an explanation and there is thus a failure to record the satisfaction by the AO, the same will render the order erroneous due to non-application of relevant provisions as applicable in the instant case and thus, the order so passed would be without application of mind.
14 ITA No. 288/JP/2020 M/s Rajendra and Ursula Joshi Skill Development P. Ltd. Jaipur Vs. Pr. CIT-2, Jaipur 19. In the instant case, we find that during the course of assessment proceedings, the AO vide notice u/s 142(1) dated 24.08.2017 has enquired about the source of increase in share capital during the year under consideration along with documentary evidence and in response, the assessee company vide letter dated NIL- Annexure C has submitted a chart giving the name of the three shareholders and amount of share capital allotted to each of them during the month of December 2014, January 2015 and March 2015 totalling Rs 120 crores. There is no explanation submitted regarding source of such funds and no documentary evidence has been brought on record by the assessee company. The AO has however taken the said submission on face value and no further show-cause or enquiry/examination has been conducted by him.
In this regard, useful reference can be drawn to facts and findings of the Hon’ble Supreme Court in case of Malabar Industrial Co. ltd (supra). In that case, the appellant entered into an agreement for sale of the estate of rubber plantation and the agreement provided, inter alia, for payment of the consideration in instalments as scheduled therein. However, the purchaser could not adhere to the schedule and on his request, the parties agreed to the extension of time for payment of the instalments on condition of his paying compensation/damages for loss of agricultural income and other liabilities in a sum of Rs. 3,66,649. Accordingly, the appellant passed a resolution also to that effect on 25-9- 1983 and the purchaser paid the said amount. In the annexure to the return filed by it for the assessment in question, the amount was noted as compensation and damages for loss of agricultural income. By order dated 31-10-1985, the ITO accepted the same and endorsed nil assessment for that year. The Commissioner having examined the records of the
15 ITA No. 288/JP/2020 M/s Rajendra and Ursula Joshi Skill Development P. Ltd. Jaipur Vs. Pr. CIT-2, Jaipur assessment found that the nil assessment order passed by the ITO was erroneous and it was prejudicial to the interests of the Revenue and held that the said amount was unconnected with any agricultural operation activity and was liable to be taxed under the head 'Income from other sources'. In the said factual matrix of the case, on appeal by the assessee, the Hon’ble Supreme Court was pleased to held as under:
“10. In the instant case, the Commissioner noted that the ITO passed the order of nil assessment without application of mind. Indeed, the High Court recorded the finding that the ITO failed to apply his mind to the case in all perspective and the order passed by him was erroneous. It appears that the resolution passed by the board of the appellant-company was not placed before the Assessing Officer. Thus, there was no material to support the claim of the appellant that the said amount represented compensation for loss of agricultural income. He accepted the entry in the statement of the account filed by the appellant in the absence of any supporting material and without making any inquiry. On these facts, the conclusion that the order of the ITO was erroneous is irresistible. We are, therefore, of the opinion that the High Court has rightly held that the exercise of the jurisdiction by the Commissioner under section 263(1) was justified.”
In the instant case as well, there is no material on record to demonstrate the source of funds so infused by way of share capital in the assessee company. The Assessing officer has merely relied on the statement of the assessee company that the shares have been allotted to the respective shareholders and in support, only the name of the shareholders and respective amount invested by them have been
16 ITA No. 288/JP/2020 M/s Rajendra and Ursula Joshi Skill Development P. Ltd. Jaipur Vs. Pr. CIT-2, Jaipur submitted. We therefore find that the facts of the present case are pari- materia with that of the Malabar Industrial (supra) and following the same, the order so passed by the AO is clearly erroneous and prejudicial to the interest of Revenue.
Having said that, when the matter was selected for the precise reason of examination of substantial increase in share capital, it is ordinarily expected that the Assessing officer shall examine these transactions thoroughly and record his satisfaction rather than just relying on the statement and basic information submitted by the assessee company. It is not a question of kind and extent of enquiry and hence, a difference of approach and methodology of examination of a particular transaction as done by the AO or suggested by the ld Pr CIT. No doubt every Assessing officer has his unique style of functioning and no hard and fast rule can be laid down as to how he should conduct the enquiry in discharge of his statutory functions. However, where the factual scenario of a case prima facie indicates claim of substantial capital infusion during the year which is also a matter and reason for selection of case under complete scrutiny and thus cry for looking deep into it, then a mere acceptance of information simplicitier without any evidence of source of such capital infusion and without conducting any further verification and examination cannot be held as conducting an enquiry. In our considered view, it is a clear case of no enquiry and lack of application of mind on part of the Assessing officer and the order thus passed is clearly erroneous and prejudicial to the interest of the Revenue.
Now, coming to the contention advanced by the ld AR that the records relating to any proceedings against the assessee as well as inquiries u/s 263 of the Act needed to be considered and with all the
17 ITA No. 288/JP/2020 M/s Rajendra and Ursula Joshi Skill Development P. Ltd. Jaipur Vs. Pr. CIT-2, Jaipur material available on record, the ld. Pr. CIT was duty bound to refer to the same and then come to the conclusion that the order of the AO was erroneous and prejudicial to the interest of the Revenue. In this regard, there is no dispute on the legal proposition that the record referred to in section 263 refers to all relevant record available at the time of examination by the ld Pr CIT. However, where it is a case of no enquiry as we have discussed above and fresh material and evidence has been brought on record subsequent to close of the assessment proceedings, the ld Pr CIT is well within his jurisdiction to remand the matter back to the file of the AO to examine all such material and evidence and decide the matter a fresh. Where the matter has not been examined by the AO at first place, the law doesn’t contemplate that the ld Pr CIT should step in the shoes of the AO and examine all such material and evidence for the first time. Had it been a case of an enquiry already been conducted by the AO, in such a scenario, where the ld Pr CIT holds a different point of view, in such a scenario, he has to record as to why the enquiry so conducted by the AO is erroneous and prejudicial to the interest of Revenue. Therefore, the contention so advanced by the ld AR cannot be accepted.
Now coming to second matter raised by the ld Pr CIT that the AO did not make any inquiries to ascertain whether the business of the assessee company was set up or not and consequent claim of business loss amounting to Rs. 56,52,325/- rendering the order so passed as erroneous and prejudicial to the interest of Revenue. In this regard, limited contention which has been raised by the ld AR relates to the fact that the case law relied upon by the ld Pr CIT is distinguishable on facts. The ld Pr CIT has already held that issue of setting up of business is to be largely decided by the facts of each case and the AO has been directed to
18 ITA No. 288/JP/2020 M/s Rajendra and Ursula Joshi Skill Development P. Ltd. Jaipur Vs. Pr. CIT-2, Jaipur verify the necessary details in case of the assessee and the decide the same a fresh. Therefore, it is not a case that the said decision has been held as binding on the AO rather the AO has been directed to apply the legal proposition so emerging therefrom and apply the same to the facts of the present case. The AO was also directed to provide an opportunity to the assessee and the said opportunity may now be read and understood to also allow the assessee to bring the distinguishing features as so contended by the AR.
Regarding the issue of increase in tangible assets where the AO failed to verify purchase of fixed assets amounting to Rs. 63.25 Cr made during the year, the ld Pr CIT has recorded a finding that no details were available on record and such details have been submitted during the revisionary proceedings vide letter dated 9.03.2020 and the AO has been directed to verify the same. No contention has been advanced by the ld AR in this regard, hence, no interference is called for.
Regarding outward foreign remittance towards purchase of machinery which has not been examined by the AO during the assessment proceedings, the ld Pr CIT has recorded a finding that the assessee has submitted Form 15CA vide reply dated 9.03.2020 and the AO has been directed to verify the same. No contention has been advanced by the ld AR in this regard, hence, no interference is called for.
In light of aforesaid discussions and in the entirety of facts and circumstances of the case, we accordingly upheld the order passed by the ld Pr CIT u/s 263 of the Act setting aside the assessment order passed by the Assessing officer for the limited purposes of examining the aforesaid
19 ITA No. 288/JP/2020 M/s Rajendra and Ursula Joshi Skill Development P. Ltd. Jaipur Vs. Pr. CIT-2, Jaipur issues afresh after making necessary examination and verification and providing necessary opportunity to the assessee.
Before parting, we may add that we have also gone through other legal authorities on the subject as brought to our notice by the ld AR which have been rendered in the context of specific facts and circumstances of the individual cases, however, the same doesn’t support the case of the assessee company.
In the result, the appeal of the assessee is dismissed.
Order pronounced in the open Court on 02/03/2021.
Sd/- Sd/- ¼ lanhi xkslkbZ ½ ¼foØe flag ;kno½ (Sandeep Gosain) (Vikram Singh Yadav) U;kf;d lnL;@Judicial Member ys[kk lnL;@Accountant Member Tk;iqj@Jaipur fnukad@Dated:- 02/03/2021 *Ganesh Kr. आदेश की प्रतिलिपि अग्रेf’ात@ब्वचल वf जीम वतकमत वितूंतकमक जवरू 1. vihykFkhZ@The Appellant- M/s Rajendra and Ursula Joshi Skill Development P. Ltd., Jaipur 2. izR;FkhZ@ The Respondent- Pr. CIT-2, Jaipur 3. vk;dj vk;qDr@ CIT 4. vk;dj vk;qDr@ CIT(A) 5. विभागीय प्रतिनिधि] आयकर अपीलीय अधिकरण] जयपुर@क्त्ए प्ज्Aज्ए Jंपचनत. 6. xkMZ QkbZy@ Guard File {ITA No. 288/JP/2020}
vkns'kkuqlkj@ By order, सहायक पंजीकार@Aेेज. त्महपेजतंत