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Income Tax Appellate Tribunal, JODHPUR BENCH, JODHPUR
Before: SHRI R.C.SHARMA & SHRI SANDEEP GOSAIN
PER SANDEEP GOSAIN, J.M.
The present appeal has been filed by the assessee against the order
of Ld. Pr. CIT-I, Jodhpur dated 26.03.2018 passed U/s 263 of the Income
Tax Act, 1961 (in short, the Act) for the assessment year 2008-09.
Following grounds have been taken by the assessee:
"1. The order passed by the ld. CIT, Jodhpur U/s 263 is bad in law and bad on facts.
The ld. CIT had erred in observing that original assessment made U/s 143(3)/148 on 31st March, 2016 was erroneous so far as prejudicial to the interest of revenue.
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The ld. Pr. CIT has erred in observing that the share capital money received during the year under consideration was not fully explained and needs to be re-examined. The same is bad in law and bad on facts.
The ld. Pr. CIT has erred in observing that the ld. AO had erred in observing that the amendment in Section 68 and Section 56(2)(viib) were applicable only from A.Y. 2013-14. Such a view cannot be said to be erroneous or prejudicial to the interest of Revenue.
The impugned order U/s 263 is illegal and most unjustified, as the same is not based on any valid material or legal evidence whatsoever on records, but the same is merely based on wrong suspicions and baseless presumptions. The impugned order deserves to be quashed.
The ld. Pr. CIT has erred in setting aside the order, particularly when the view of the ld. AO was based on judicial decision of Hon'ble Supreme Court and Hon'ble Rajasthan High Court. The contrary view taken by the ld. Pr. CIT was bad in law and bad on facts and setting aside the order was not justified.
The appellant pray for suitable costs.
The appellant pray for stay of impugned order.
The appellant craves liberty to add, amend, alter, and modify any of the ground of appeal on or before its hearing before your honour."
The facts of the case are that the assessee submitted return of
income for A.Y. 2008-09 at NIL income which was assessed as such. The
AO initiated proceedings U/s 148 of the Act vide notice dated 30.03.2O15
and assessment was completed. The assessment U/s 143(3)/148 of the Act
was completed vide order dated 31.03.2017 in which the income as
originally assessed was accepted.
Initially the assessment proceedings for A.Y. 2009-10 was initiated by
the AO by taking action U/s 148 of the Act as according to him there was
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increase in share capital of the company, which was not genuine and he
passed order U/s 143(3)/148 of the Act making addition of the said
amount. The addition was deleted in appeal before the ld. CIT(A) and the
said order was also confirmed by Jodhpur Bench of the ITAT in their order
dated 09.08.2017 in ITA No. 207/Jodh/2017. One of the reasons for
deleting the said addition in the said year was that the amount of share
capital was received in AY 2008-09 and only allotment of shares was made
in AY 2009-10, and therefore on these grounds the addition cannot be
sustained.
From the records, it appears that from the said finding for AY 2009-
10 given in the appellate proceedings action U/s 148 was taken for the year
under consideration. Even from the reasons recorded it is seen that the
action was taken on the basis of proceedings for AY 2009-10.
The contention of the assessee is that the proceedings for the year
under consideration for initiated for verification of the share capital which
are the same grounds as taken for the A.Y. 2009-10, and complete details
which were submitted in A.Y. 2009-10 were also submitted in the year
under consideration also. The AO while completing the said assessment had
examined these details and after complete verification of the same and also
considering the fact that the amount of share capital cannot be assessed in
the hands of the assessee for the year under consideration as the
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amendment in Section 2(24), Section 56(2)(viib) and Section 68 were made
applicable from A.Y. 2013-14 in relation to share capital and premium and
therefore, no addition was made. This decision of the AO was examining
the complete details and this was precisely the reason for which the action
U/s 148 was taken. Such a view according to the appellant cannot be said
to be erroneous view and there was no justification for initiation of action
U/s 263 by the CIT.
It was also contended that in the various judicial decisions and it is
held that when the identity of the share holder is established no addition
can be made in the hands of the assessee. The amendments made in the
law in Section 68 of the Act as well as in Section 56 of the Act were
applicable only from assessment year 2013-14 and were not applicable in
the year under consideration. Even on merits of the case it was submitted
that the assessee had submitted that voluminous details with regard to the
issue of share capital. The assessee company received a total sum of Rs.
1,50,00,000/- (One crore and fifty lacs) from 5 limited companies as Share
Application money alongwith Share Premium in A.Y. 2008-09. The shares
were allotted to all those companies in A.Y. 2009-10. It was contended that
the assessee submitted interalia the Copies of accounts of all the companies
pertaining to A.Y. 2008-09 and A.Y. 2009-10 indicating the amount was
received towards share application, copy of bank statement, confirmations,
copy of PAN card, and annual reports.
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The assessee also contended that that no addition U/s 68 of the Act
can be made in respect of share capital and share premium in the hands of
the assessee company, where the assessee company had furnished
evidence to prove the identity, of the shareholders and the issue is covered
in favour of the appellant by the decision of Honble Supreme Court in the
case of CIT V/s Lovely Exports (P.) Ltd. (2008) 6 DTR (SC) 308 in which it
was held that If the share application money is received by the assessee
company from alleged bogus shareholders, whose names are given to the
AO, then the Department is free to proceed to reopen their individual
assessments in accordance with law, but it cannot be regarded as
undisclosed income of assessee company. Similar view was given by the
Hon'ble Supreme Court in the case of CIT v. Steller Investment Ltd. (2000)
164 CTR (SC) 287: 251 ITR 263 (SC) in which it was held that even if it be
assumed that the subscribers to the increase share capital were not
genuine, nevertheless, under no circumstances can the amount of share
capital be regarded as undisclosed income of the assessee. Reference was
also made to the judgment of Hon'ble Rajasthan High Court in the case of
CIT v. Shree Barkha Synthetic Ltd. 182 CTR (Raj) L75, in which High Court
has followed the judgement of Hon'ble Supreme Court in the case of CIT
V/s Steller Investments Ltd.
In order U/s 263 of the Act the CIT, Jodhpur had referred to the
allotment of share to the companies and observed that enquiry letter were
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issued to them in AY 2009-10 U/s 133(6) which were returned back. During
A.Y. 2009-10 the appellant could not prove the source and creditworthiness
of the share capital received. The shares of the company in the subsequent
years had been transferred to certain related persons which also indicates
that the share capital received was not genuine. The crux of the order is
that the AO was not justified in accepting the contention of the assessee
and the order so passed is erroneous and prejudicial to the interest of
Revenue and therefore, the order was set aside to make fresh examination
of the genuineness of the share application money U/s 68 of the Act.
On the other hand, the ld CIT-DR has relied on the orders of the
authorities below.
We have heard the ld. counsels for both the parties and have also
considered the material placed on record, order passed by the Revenue
Authorities as well as judgements relied upon by the parties. From the
record, we notice that main issue in the present controversy is as to
whether the order passed by the A.O. can be said to be erroneous or
prejudicial to the interest of revenue. In case the order passed U/s
143(3)/148 of the Act, the A.O. is not erroneous then eventuality the power
U/s 263 of the Act cannot be exercised. From the facts, we notice that in
the reassessment order passed, the issue had been duly examined and on
the basis of the examination of the relevant records and the application of
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law, one of the possible opinion had been drawn by the A.O., which cannot
be said to be erroneous so far as prejudicial to the interest of revenue. In
this regard, we drawn interest from the decision of the Hon’ble Supreme
Court in the case of Malabar Industrial Co. Ld. Vs CIT (2000) 243 ITR 83
(SC) wherein the Hon’ble Supreme Court had observed that “Section 263 of
the Income Tax Act, 1961, makes it clear that the prerequisite for the
exercise of jurisdiction by the Commission suo moto under it, is that the
order of the Income Tax Officer is erroneous in so far as it is prejudicial to
the interests of the revenue. Even if one of them recourse cannot be held
to Section 263(1) of the Act. The A.O. after going through the material on
record and after considering the explanation of the assessee, had applied
his mind. His view was that the amendment are not applicable in the case
of the assessee for the year under consideration which is a possible view.
The CIT did not agree with the conclusion reached by the ITO. However,
Section 263 of the Act does not empower him to take action on these facts
to arrive at the conclusion that the order passed by the ITO is erroneous
and prejudicial to the interest of the revenue. Since the material was there
on record and the said material was considered by the ITO and a particular
view was taken, the mere fact that different view can be taken, should not
be the basis for an action U/s 263 of the Ac and it cannot be held to be
justified.
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The basis for an action U/s 263 of the Act and it cannot be held to be
justified. The order can be said to be erroneous assessment only if it
deviates from the law and if the AO acting in accordance with law makes a
assessment, the same cannot be branded as erroneous by the
Commissioner. The AO has exercised the quasi-judicial power vested in him
accordance with law and arrived at a conclusion and such a conclusion
cannot be termed to be erroneous simply because the Commissioner does
not feel satisfied with the conclusion. In the present case it cannot be said
that there is an incorrect application of law so that the order being
erroneous. The amendments were from A.Y. 2013-14 and the judicial
decisions were also to the effect that it cannot be made in relation to share
capital where identity is proved. The phrase "prejudicial to the interests of
the Revenue" has to be read in conjunction with an erroneous order passed
by the Assessing Officer. The view of the AO that the amendments were
not retrospective is also one of the possible view and such a view cannot be
said to be erroneous. The Hon'ble Supreme Court in the case of CIT v.
Vatika Township Private Limited reported (2014) 367 ITR 466 (SC) held
that when the amendment was made from a particular date the intention of
the legislature was to treat it prospective and it could not be treated as
declaratory/statutory or curative in nature. Similarly in the case of Zile
Singh Vs State of Haryana & Ors. 2004(8) SCC 1, it was observed as follows
the cardinal principle of construction that every statute is prima facie
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prospective unless it is expressly or by necessary implication made to have
a retrospective. Unless there are words in the statute sufficient to show the
intention of the legislature to affect existing rights, it is deemed to be
prospective only." In view of above we find that there is no error in the
conclusion drawn by the AO while passing the order and therefore, the
impugned order U/s 263 of the Act is not justified and the same is hereby
quashed.
In the result, appeal of the assessee is allowed
Order pronounced in the open court on 19/03/2020.
Sd/- Sd/- (R.C.SHARMA) (SANDEEP GOSAIN) Accountant Member Judicial Member
Dated :. 19/03/2020 *Ranjan Copy of the order forwarded to : 1. The Appellant 2. The Respondent 3. CIT 4. The CIT(A) 5. DR, ITAT, Jodhpur 6. Guard File (ITA No. 156/Jodh/2018)
Assistant Registrar Jodhpur Bench