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Income Tax Appellate Tribunal, “B” BENCH, KOLKATA
Before: Shri Rajesh Kumar, AM& Shri Pradip Kumar Choubey, JM]
ORDER
Per Shri Rajesh Kumar, AM
The appeal filed by the assessee is against the order of Ld. CIT(A), NFAC, Delhi dated 13.10.2023 for AY 2008-09 passed u/s. 250 of the Income Tax Act, 1961 (hereinafter referred to as the “Act”).
We observe from the appeal folder that this appeal of the assessee is time barred by 132 days and a condonation petition is available on record. We find from the COD that the appellate order was served electronically on wrong email bansalsanjay16@hotmail.com instead of registered mail of the assessee with the Deppt. ssahu2005@gmail.com. Considering the averments made in the said application for condonation of delay , we find the reasons for late filing of appeal to be sufficient and bonafide and accordingly we condone the delay and admit the appeal for hearing.
3. The ground raised
by the assessee are as under:
1. That the order u/s 143(3) r.w.s. 263 of the Act passed by Ld. AO is bad in law and is passed in contravention of prevailing law as well as facts of the case, therefore liable to be annulled.
Nature Commercial Pvt. Ltd., AY 2008-09 2. That the order passed by Ld. AO u/s 143(3) r.w.s. 263 of the Act is further illegal and not tenable under the law as the reassessment order passed u/s 147 of the Act itself was illegal and not tenable under the law and thus, no valid proceedings u/s 263 of the Act could have been undertaken against the same.
That the order passed by Ld. AO u/s 143(3) r.w.s. 263 of the Act is further illegal and not tenable under the law as all the evidences were duly furnished by the assessee during the course of original assessment proceedings and the said evidences were duly adjudicated by Ld. AO.
That the Ld. AO grossly erred in law and in facts of the case in making addition of Rs.12,86,00,000/- under Section 68 of the Act despite the fact that the onus cast upon the assessee was duly discharged and no deficiency in the submissions of the assessee was enumerated in the assessment order.
That the Ld. AO grossly erred in law and in facts of the case in not accepting identity, creditworthiness and genuineness of subscribers of share capital only due to their non-appearance before AO in response to notice issued u/s 131 of the Act.
That the assessee company seeks leave to add, alter, modify or delete any ground of appeal
during the course of appellate proceedings.”
4. Ground no. 1 is general in nature.
5. The issue raised in ground nos. 2 and 3 is that the consequential assessment order passed by the Assessing Officer u/s. 143(3) r.w.s. 263 of the Act in the set aside proceeding is invalid and liable to be quashed on the ground that the revisionary order passed u/s. 263 of the Act was itself an invalid and nullity in the eyes of law.
6. The facts in brief are that the return of income was filed on 10.02.2009 declaring total income at Rs.430/-. The case of the assessee was reopened u/s.148 on 03.03.2010 on the ground that assessee has wrongly claimed the share issue expenses of Rs.22,600/- which has escaped assessment and accordingly, the statutory notices were issued along with questionnaire which were duly served upon the assessee. The assessment was completed u/s. 143(3) r.w.s. 147 vide order dated 29.04.2020 assessing the income at Rs.23,013/-. Thereafter, the said order was revised by the Ld. Pr. CIT u/s. 263 of the Act vide order dated 11.03.2013 setting aside the assessment so framed. No appeal was preferred against the said revisionary order. In the set aside proceeding, the Assessing Officer issued notice u/s. 142(1) in response to which the Ld. Counsel for the assessee Shri Vijay Kumar Gupta, ACS appeared and Nature Commercial Pvt. Ltd., AY 2008-09 furnished the details and evidences called for. Thereafter, the Assessing Officer discussed the reasons for initiating the proceedings u/s. 263 of the Act on account of share capital issued by the assessee during the financial year thereby collecting share capital/share premium to the tune of rs.12,86,00,000/- from 39 subscribers. The Assessing Officer noted that in the proceeding which culminated vide order passed u/s. 143(3)/147 of the Act dated 29.04.2010 the Assessing Officer called for that details and evidences from the assessee qua the share capital and share premium and even in order to verify the transactions independently issued notices u/s. 133(6) of the Act to 25 share subscribers. The Assessing Officer noted from the examination of the Balance Sheet that during the financial year the assessee has issued 6,43,000 new equity shares of Rs. 10/- each at premium of Rs. 190/- per share to 39 subscribers out of which the Assessing Officer picked up only 25 subscribers for verification by issuing notices u/s. 133(6) of the Act. Thereafter, the Assessing Officer noted that the Ld. Pr. CIT upon examination of the assessment records observed that the Assessing Officer has not conducted any independent enquiry though the evidences were called for from the assessee as well as from the subscribers u/s. 133(6) of the Act. Thereafter, the Assessing Officer extracted the revisionary order from page 2 to 7 in the assessment order and thereafter in two paras concluded the assessment. In the second para of page no. 7, the Assessing Officer noted that as per the specific direction of Ld. Pr. CIT , notices u/s. 131 of the Act were issued to the shareholders and they were specifically asked to appear in order to verify the identity and creditworthiness of the shareholders and genuineness of the transactions. The Assessing Officer noted that none appeared and thereafter issued show cause notice to produce evidences failing which why this should not be treated as bogus and non- genuine. It was also required in the show cause notice that the directors of the subscriber companies were also to be produced before the Assessing Officer failing which the investment would be treated as non-genuine. Thereafter, the Assessing Officer noted that since there was no compliance on the part of the shareholder and accordingly, the transactions of investment in the assessee company could not be Nature Commercial Pvt. Ltd., AY 2008-09 verified. Consequently, the entire share capital/share premium of Rs.12,86,00,000/- was treated as unexplained cash credit and added to the income of the assessee in the assessment framed u/s. 143(3) r.w.s. 263 of the Act dated 28.03.2014.
Ld. CIT(A) dismissed the appeal of the assessee after taking into account the submissions/arguments of the assessee on legal as well as on merit. While deciding the issue Ld. CIT(A) has observed and held as under: “5.2. I have carefully considered the facts of the case, the submission of the appellant and evidences on record. The appellant has submitted that the original assessment proceedings undertaken u/s. 148 of the Act for AY 2008-09 were initiated by the Assessing Officer by issue of notice dated 03.03.2010 and that the said notice was issued after seeking prior approval u/s. 151 of the Act from Ld. CIT but as per the provisions of law contained u/s. 151 of the Act from ld. CIT but as per the provisions of law contained u/s. 151 of the Act the approval of JCIT was required for reopening of assessment proceedings. However, as the Assessing Officer has taken approval from Ld. CIT and the appellant has submitted that entire reassessment proceedings undertaken by u/s. 148 of the Act are void ab initio and the notice issued u/s. 148 of the Act deserves to be quashed. However, this claim of the appellant is not tenable under the law, as this appeal is against the order passed by the Assessing Officer u/s. 143(3) r.w.s. 263 of the Act dated 28.03.2014 and not the order u/s. 143(3) r.w.s. 147 passed by the Assessing Officer on 29.04.2010. It may also be noted that the appellant has not submitted any evidence that it had challenged the validity of the original proceedings u/s. 143(3) r.w.s. 147 of the Act during the course of the assessment proceeding before the Assessing Officer and it is apparent that the appellant as complied and cooperated with the assessment proceedings. 5.3 The appellant has also submitted that the legality of reassessment proceedings completed u/s 148 of the Act can be challenged at this stage and that the same has been held valid in many judicial precedents. The appellant has relied on the case ofWestlife Development Ltd. vs. PCIT (2016) 47 CCH 0305 (Mum)(Trib) wherein it was held that as per law, the validity of the order passed in the primary (original) proceedings should be allowed to be examined even at the subsequent stages, only for the limited purpose of examining whether the collateral (subsequent) proceedings have been initiated on a valid legal platform or not and for examining the validity of assumption of jurisdiction to initiate the collateral proceedings. It was held that the Assessee should be permitted to challenge the validity of order passed u/s 263 on the ground that the impugned assessment order was non est. 5.4 The appellant has also submitted that it has been judicially settled that only valid assessment order can be sought to be amended by invoking powers conferred u/s 263 of the Act and when re-assessment order itself is bad in law, same cannot" be revised u/s 263, since, only valid re-assessment order can be revised u/s 263. It may be noted that the appellant cannot challenge the validity of an order passed by the Ld. CIT-1, Kolkata before the CIT(A). The right forum would be the Hon'ble ITAT. No evidence of such appeal challenging the validity of the order U/S 263 of the Act passed by the Ld. CIT-1, Kolkata before the ITAT has also been submitted during the course of appellate proceedings. Such grounds of appeal
before the CIT(A) are beyond the jurisdiction and therefore are infructuous. It may also be noted that several opportunities were given by the Ld. CIT-1, Nature Commercial Pvt. Ltd., AY 2008
09. Kolkata to the appellant during the proceedings u/s 263 of the Act but the appellant failed to appear. Therefore, the appeal on grounds no 1 & 2 are treated as dismissed.”
The Ld. Counsel for the assessee vehemently submitted that the assessment framed u/s. 143(3) r.w.s. 263 of the Act is invalid and nullity in the eyes of law as the same is passed consequent to invalid jurisdiction exercised and order passed by the ld. Pr. CIT u/s 263 of the Act. The ld AR submitted that though the assessee had not filed any appeal against the revisionary order but vehemently argued that even in the collateral proceedings the assessee can challenge the validity of the revisionary proceedings. In defense of his arguments, the Ld. Counsel for the assessee relied on the following decisions: i) Barik Biswas Vs. ACIT [ITA Nos. 521 to 526, 527, 1094, 918/Kol/2024] dated 02.04.2025.
(ii) Classic Flour & Food Processing Pvt. Ltd. Vs. ITO, & 766/Kol/2014 dated 05.04.2017.
The Ld. AR, therefore, submitted that it is judicially settled that if the original order is illegal in terms of its jurisdiction because the same is null and void in the eyes of law on the jurisdictional ground then it cannot give rise to any initiation of further valid proceeding and, therefore, all the subsequent proceedings would be invalid in the law. The Ld. AR also relied on the decision of Westlife Development Ltd. Vs. PCIT [2017] 88 taxmann.com 439 (Mum. Trib.).
The Ld. AR vehemently submitted that the assessment u/s. 147/143(3) of the Act was framed by the Assessing Officer vide order dated 29.04.2010. The said reopening was made on the ground that the assessee had claimed share capital issue expenses of Rs.22,600/- and the assessment was completed making the said addition thereby assessing the income at Rs.23,300/-. The Ld. AR submitted that it is not the case that reopening was made on the ground of non-genuine share capital/share premium raised by the assessee from 39 subscribers. Dad it been so then the Assessing Officer would have the occasion during the reassessment proceeding to Nature Commercial Pvt. Ltd., AY 2008-09 call for records from the assessee qua the said share capital/share premium. The ld AR argued that despite that the Assessing Officer called for the explanation/evidences from the assessee on the share capital/premium raised during the year and verified these transactions on the basis of evidences furnished by the assessee. The ld. AR submitted that the AO in order to independently verify the transactions of share capital/premium issued notices u/s. 133(6) to 25 subscribers out of total 39 subscribers. Thereafter, the Assessing Officer after examining these evidences and also the replies received in response to notices u/s. 133(6) did not make any addition, though no discussion was made in the assessment order qua this issue. The ld. AR submitted that the said order passed by the Assessing Officer is neither erroneous nor prejudicial to the interest of the revenue as the Assessing Officer has taken a plausible and possible view on the basis of evidences before him. The Ld. AR submitted that in order to invoke jurisdiction u/s. 263 of the Act, the assessment has to erroneous as well as prejudicial to the interest of the revenue and the simultaneous satisfaction of both the conditions has to be mandatorily satisfied and in absence of which the jurisdiction u/s. 263 of the Act is not available to the Pr. CIT. In defense of his arguments, the Ld. AR relied on the decision of Malabar Industrial Co. Ltd. Vs. CIT 243 ITR 83 (SC).
The Ld. AR, thereafter submitted that it is not necessary that Assessing Officer has to discuss the issue elaborately in the assessment order. It is enough if the Assessing Officer has called for information and examined the same. The Ld. AR submitted that it is not open to the Ld. Pr. CIT in the revisionary proceeding to merely set aside the assessment proceeding without making any definitive finding as to how the order is erroneous and prejudicial to the interest of the revenue. The mere remarks on the part of the ld. Pr. CIT that Assessing Officer had not carried out proper enquiry on the evidences available in the assessment folder was not suffice for invoking the jurisdiction u/s. 263 of the Act. The jurisdiction u/s. 263 is not available if the Ld. Pr. CIT holds a different view of the issue than the Assessing Officer and the view of the Assessing Officer cannot be substituted with the view of the Ld. Pr.
Nature Commercial Pvt. Ltd., AY 2008-09 CIT by resorting to the revisionary proceeding. In defense of his arguments, the Ld. AR relied on the decisions JCIT Vs J.L. Morison (India) Ltd. (2014)46taxmann.com215(Cal) and PCIT Vs Britannia Industries Ltd. (2023) 146 taxmann.com 246(Cal).
The Ld. AR, thereafter referred to the notice issued u/s. 263 of the Act by the ld. Pr. CIT on 31.12.2012, a copy of which is available at page 175 of the paper book, in which the Ld. Pr. CIT has only stated that from examination of the assessment order, it appears prima facie that assessment order passed by the Assessing Officer is erroneous and prejudicial to the interest of the revenue and there is no mention of any issue because of which the assessment was rendered erroneous and prejudicial to the interest of the revenue. The Ld. AR submitted that it is a faulty notice. The assessee has also replied by submitting that the assessee has filed all the details and documents before the Assessing Officer and the assessment was framed after taking into account of the evidences and details filed by the assessee and, therefore, the assessment framed is not prejudicial to the interest of the revenue. The Ld. AR submitted that there is grave miscarriage of justice as the assessment was revised even without giving proper show cause notice to the assessee.
On the issue of Assessing Officer’s conducting proper enquiry the ld. Counsel for the assessee vehemently argued that the revisionary jurisdiction u/s. 263 of the Act is available only where there is complete lack of enquiry and not in a case of inadequate enquiry. The Ld. AR submitted that the Ld. Pr. CIT has to give a definitive finding on the issue which was proposed to be the basis for revision of the assessment order but in the present case, the Ld. Pr. CIT has not given a finding as to how the inadequate enquiry by the Assessing Officer into the issue has rendered the assessment order erroneous and prejudicial to the interest of the revenue. In other words, the Ld. Pr. CIT has no jurisdiction u/s. 263 to direct the Assessing Officer to conduct enquiry to verify and find out whether the order passed assessment framed is erroneous or not. In defense of his argument, the ld. AR relied on the decision of ITO Vs. D. G. Housing Projects Ltd. 343 ITR 329 (Del.). The Ld. AR, therefore, Nature Commercial Pvt. Ltd., AY 2008-09 prayed that since the revisionary jurisdiction as well as the order passed u/s. 263 of the Act was invalid and nullity in the eyes of law, all the subsequent proceedings are also invalid. Therefore, the order passed by the Assessing Officer u/s. 143(3) r.w.s. 263 of the Act is also invalid and, therefore, the same may kindly be quashed.
The Ld. AR submitted that if at all, the revision of any assessment was to be made, that could have been done of the order passed u/s. 143(1) of the Act but since a considerable time have elapsed since the passing of the order u/s. 143(1) dated 03.12.2009 , therefore, the same is barred by limitation in terms of provisions of section 263(2) of the Act. The Ld. AR in defense of his argument relied on the decision of of Hon’ble Apex Court in PCIT Vs. Alegendran Finance Ltd. (2007) 293 ITR 1(SC).The Ld. AR submitted that on this account the revisionary jurisdiction is barred by limitation.
The Ld. DR, on the other hand, relied on heavily on the order of PCIT by submitting that in this case, there is no bar in invoking the provisions of sec. 263 of the Act on the issue of share capital/share premium being raised during the year which was not properly verified and examined by the Assessing Officer in reassessment proceeding and, therefore, it was rightly held by the Ld. Pr. CIT that the order passed u./s. 143(3)/147 is erroneous and prejudicial to the interest of the revenue. The Ld. DR submitted that the assessee cannot be allowed to raise the issue of invalid revisionary proceeding in an appeal which is against the order of Commissioner of Income Tax (Appeals) as the assessee has not filed any appeal against the order passed by the Ld. Pr. CIT u/s. 263 and, therefore, grounds of appeal
raised by the assessee challenging the validity of proceedings u/s. 263 may kindly be quashed.
16. We have heard the rival submissions and carefully perused the material available on record. The undisputed facts are that the assessment was reopened u/s. 147 and assessment was framed u/s. 143(3) r.w.s. 147 vide order dated 29.04.2010 assessing the income at Rs.23,030/-. The case was reopened after recording the reasons which state that the assessee has claimed share capital issue expenses of Nature Commercial Pvt. Ltd., AY 2008-09 Rs.22,600/- and, therefore, the income has escaped assessment to that extent. Though in the reassessment proceedings, the Assessing Officer has called for the evidences/explanation from the assessee qua the share capital/share premium which were duly furnished during the reassessment proceedings. The Assessing Officer has independently verified the transactions by calling for information/details by issuing issue notices u/s. 133(6) to 25 subscribers out of 39 subscribers who complied with the said notices by furnishing all the details/evidences. Pertain to state that assessee issued 6,43,000/- equity shares to 39 subscribers of face value of Rs. 10/- each at a premium of Rs. 190/- per share. The Assessing Officer during the reassessment proceedings examined the documents furnished by the assessee as well as by the subscribers and accepted the plea of the assessee and no addition was made. Now, the Ld. Pr. CIT invoked 263 proceedings on the ground that the order passed by the Assessing Officer u/s. 143(3)/147 is rendered erroneous and prejudicial to the interest of the revenue on the ground that the AO has not conducted proper enquiries into the issue of share capital/share premium though the evidences are on record and replies were received in response to letters issued u/s. 133(6). The assessee has challenged the validity of revisionary order passed u/s. 263 in the collateral proceedings before us. After examining all the relevant facts and legal position in this regard, we are of the view that assessee can validly raise the issue of validity of the revisionary order in the collateral proceedings. The case of the assessee finds support from the decision of Barik Biswas (supra) wherein the Co-ordinate Bench has held that the revisionary proceedings can be challenged in the collateral proceeding by relying on the decision of Hon’ble Apex Court in the case of PCIT Vs. Bulbul Agarwal, SLP (C) No. 26629/2023 dated 19.02.2025 wherein the Hon’ble Apex Court while dismissing the SLP also referred to the order of Coordinate Bench in para 14 and 15 whereby the Tribunal held that validity of the order can be taken in collateral proceeding and in para 16 quashed the order passed u/s. 263 of the Act. The said decision of the Coordinate Bench has also been followed in the case of Binay Kumar Jindal & Ors. in for AY 2013-14 dated 18.08.2021 wherein it has been held Nature Commercial Pvt. Ltd., AY 2008-09 that validity of the order can be tested in the collateral proceedings. In the case of Westlife Development Ltd. Vs. PCIT [2017] 88 taxmann.com 439 (Mum) (Trib.), the coordinate bench has held as under: “8.1. We have analysed this issue carefully. There is no doubt that after passing of the original assessment order, the primary (i. e. original proceedings) had come to an end and attained finality and, therefore, outcome of the same cannot be disturbed, and therefore, the original assessment order framed to conclude the primary proceedings had also attained finality and it also cannot be disturbed at the instance of the assessee, except as permitted under the law and by following the due process of law. Under these circumstances, it can be said that effect of the original assessment order cannot be erased or modified subsequently. In other words, whatever tax liability had been determined in the original assessment order that had already become final and that cannot be sought to be disturbed by the assessee. But, the issue that arises here is that if the original assessment order is illegal in terms of its jurisdiction or if the same is null & void in the eyes of law on any jurisdictional grounds, then, whether it can give rise to initiation of further proceedings and whether such subsequent proceedings would be valid under the law as contained in Income Tax Act? It has been vehemently argued before us that the subsequent proceedings (i.e. collateral proceedings) derive strength only from the order passed in the original proceedings (i.e. primary proceedings). Thus, if order passed in the original proceedings is itself illegal, then that cannot give rise to valid revision proceedings. Therefore, as per law, the validity of the order passed in theprimary (originalproceedings should be allowed to be examined even at the subsequent stages, onlyfor the limited purpose of examining whether the collateral (subsequent) proceedings have been initiated on a valid legal platform or not an or examining the validity of assumption of jurisdiction to initiate the collateral proceedings. If It is not so allowed, then, it may so happen that though order passed in the original proceedings was illegal and thus order passed in the subsequent proceedings in turn would also be illegal, but in absence of a remedy to contest the same, it may give rise to an 'enforceable' tax liability without authority of law. Therefore. the Courts have taken this view that jurisdictional aspects of the order passed in· the primary proceedings can be examined in the collateral proceedings also. This issue is not res integra. This issue has been decided in many judgments by various courts, and some of them have been discussed by us in followings paragraphs."
Considering the facts of the assessee’s case in the light of the aforesaid decisions, we are inclined to hold that assessee is well within its right to challenge the validity of an order in the appellate proceedings. We have also examined the show notice issued u/s. 263 of the Act dated 31.12.2013, a copy of which is available at page 176 of the paper book and find that in the said notice, there is no discussion Nature Commercial Pvt. Ltd., AY 2008-09 about the issue which has rendered the assessment framed u/s. 143/147 dated 29.04.2010 as erroneous and prejudicial to the interest of the revenue. In our opinion, the said notice an invalid notice and cannot be the basis of the valid proceeding u/s. 263. For the sake of ready reference, the notice is extracted below:
A perusal of the above notice reveals that the said notice is in fact no notice and cannot be a show cause notice for revision of assessment framed. Therefore, when the very basis of the foundation of initiation of proceedings is defective and incomplete and violates the principle of natural justice. The consequent proceeding including the revisionary order framed u/s. 263 of the Act cannot be valid. Even on this score the order framed by the ld. Pr. CIT u/s. 263 of the Act is invalid rendering all the consequential proceedings is invalid and nullity in the eyes of law.
We also find that in this case, the reassessment has been framed u/s. 143(3)/147 of the Act vide order dated 29.04.2010 after re-opening the assessment u/s 147 of the Act by issuing notice u/s 148. We also note that the reasons for re- Nature Commercial Pvt. Ltd., AY 2008-09 opening were recorded which stated that the re-=opening was on account of wrong claim of share issue expenses of Rs.22,600/-. In the reassessment proceeding though the Assessing Officer called for the necessary documents/evidences from the assessee in support of share capital and share premium which were duly furnished before the Assessing Officer. We note that the AO in order to independently verify the transactions of issue of shares to 39 subscribers also issued notices u/s. 133(6) to 25 subscribers who duly responded to the said notices and the replies were part of the assessment records. The Assessing Officer while framing the reassessment dated 29.04.2010 has taken a plausible view after taking into account the arguments of the assessee and also the documents/evidences filed by the assessee as well as by the share subscribers. Therefore, in our opinion, the said order cannot be said to be erroneous and prejudicial to the interest of the revenue. Once it proved that order is not erroneous and prejudicial to the interest of the revenue which are the primary conditions to be fulfilled for invoking jurisdiction u/s. 263 of the Act then the Ld. Pr. CIT has no jurisdiction to resort to the revisionary powers to set aside the assessment order. The case of the assessee finds support from the decision of Malabar Industrial Co. Ltd. Vs. CIT (supra), wherein it has been held that the satisfaction of twin condition i.e. erroneous and prejudicial to the interest of the revenue are to be satisfied simultaneously and even if one of the two conditions is satisfied, the jurisdiction u/s. 263 of the Act is not available to the Ld. Pr. CIT. Even on this score, the revisionary jurisdiction is invalid and cannot be sustained. We also note that in this case, the revisionary jurisdiction was invoked by the Ld. Pr. CIT by holding that the Assessing Officer has not conducted proper enquiries meaning thereby that this is not a case of no enquiry but if at all, it could be a case of inadequate enquiry by the Assessing Officer. Needless to say the issue has been examined in the reassessment proceeding by calling for the records/evidences from the assessee as well as from the subscribers u/s. 133(6) which unequivocally proved that the Assessing Officer has conducted enquiry and, therefore, it cannot be said that this is a case of no enquiry. It is a settled principle of law that provisions of section 263 could not be invoked for Nature Commercial Pvt. Ltd., AY 2008-09 inadequate enquiry by the Assessing Officer. The Assessing Officer is a quasi- judicial authority and is supposed to pass the orders judiciously after taking into consideration all the facts and circumstances and once the Assessing Officer has passed the order considering the facts and circumstances of the case by taking a plausible view then it is not open to the Ld. Pr. CIT to substitute his view in place of the Assessing Officer on the ground that he does not agree with the view taken by the Assessing Officer unless the same is not in accordance with law or is contrary to the facts on record. The case of the assessee finds support from the following decisions CIT Vs Sunbeam Auto Ltd. (2011 )332 ITR 0167(Delhi) and CIT Vs R.K. Construction (2009) 313 ITR 0065(Guj). Even on this score the revisionary jurisdiction exercised by the Ld. Pr. CIT is invalid.
We have also observed from the order of Ld. Pr. CIT that Ld. Pr. CIT has solely revised the assessment order passed u/s. 143(3)/147 of the Act dated 29.04.2010 on the ground that the Assessing Officer has not conducted proper enquiry and, therefore, the assessment was revised by restoring the issue to the file of the Assessing Officer to do the necessary verification without giving any definitive or conclusive finding thereon as to how the order passed by the Assessing Officer is erroneous and prejudicial to the interest of the revenue, due to the issue proposed in the revisionary order. The case of the assessee finds support from the decision of ITO Vs. D. G. Housing Projects Ltd. (2012) 343 ITR 349 (Delhi), wherein it has been held that where the Ld. Pr. CIT revised the assessment order it is incumbent upon him to record a finding as to how the order passed by the Assessing Officer is erroneous and prejudicial to the interest of the revenue due to the items proposed in the revisionary order. Since this is not the case before us , therefore, on this score the revisionary order is invalid.
Even if we consider that revision could be invoked to the assessment framed u/s 143(1) dated 03.09.2012, but the same is hopelessly barred by limitation and the same is beyond the time limit provided u/s. 263(2) of the Act as has been held by the Hon’ble Apex Court in PCIT Vs. Alegendran Finance Ltd. (Supra).
Nature Commercial Pvt. Ltd., AY 2008-09 22. Considering the above facts and circumstances and the legal position as laid down by the various judicial forums, we are inclined to hold that the assessment framed by the Assessing Officer u/s. 143(3)/263 of the Act in the set aside proceedings is invalid as the same emanated from the revisionary order u/s 263 of the Act which is itself invalid and nullity in the eyes of law.
So far as the merits of the case are concerned, we find that during the year the assessee has issued 6,43,000 new equity shares to 39 subscribers and during the course of reassessment proceeding u/s. 143(3)/147, the assessee has filed before the Assessing Officer confirmations from the subscribers, ITRs acknowledgements, audited financials of the subscribers, list of names and addresses of the subscribing companies, bank statements of the subscribers, master data of the subscribers down loaded from the MCA portal etc. Besides the AO independently verified these transactions of share capital/share premium by calling for information/details from 25 subscribers by issuing letters u/s 133(6) of the Act. Having considered these documents, the Assessing Officer in the re-assessment proceeding accepted the receipt of money by the assessee by way of share capital/share premium and no addition was made. However, in the proceeding u/s. 143(3) read with section 263 of the Act, the Assessing Officer after extracting the revisionary order at page nos. 2 to 7 simply concluded the assessment order in two paras of page 7 by noting that as per specific direction of the Ld. Pr. CIT, notices u/s 131 were issued to the share holders asking them to personally appear to verify the identity, creditworthiness of the subscribers and genuineness of the transactions. However, in response to the said notices, none appeared and, therefore, a show cause notice was issued as to why these transactions of share capital/share premium should not be treated as bogus and added to the income of the assessee. Thereafter, the Assessing Officer noted that there was no compliance and finally, he treated the share capital/share premium as unexplained cash credit and added the same to the income of the assessee.
In the appellate proceeding, the Ld. CIT(A) dismissed the appeal by holding as under:
Nature Commercial Pvt. Ltd., AY 2008-09 “8.17 In the present case, the AO issued notices u/s 131 of the Act to the shareholders who did not appear. Further, the appellant also failed to produce evidences to prove that the transactions with the share holders were genuine and appellant failed to produce the share holder companies to prove the identity and creditworthiness of the share holders and genuineness of transaction. Merely submitting the documents is not enough. These share holders are not some unknown person but are known to the appellant as they have invested in the appellant company. These are private placement of shares where the information is within the personal knowledge of the appellant as the share holders are supposed to be not some strangers or some unknown entities to whom the appellant has sold its shares without due diligence and knowledge. The appellant produced documents like Confirmation of accounts having description of source of investment, Copy of ITR filing acknowledgment, Audited financials of subscribers, list of Investment of subscriber companies, Extract of bank statement of subscribers etc. and that shows that the appellant is in contact with the share subscribers and therefore if they were indeed genuine, the appellant could have produced them beforethe AO but have failed to do so, as it shows that the share holders are only paper companies and not genuine. Initial onus is on the appellant to establish the identity of the person, creditworthiness of the person in the sense offinancial capacity and the genuineness of the transaction, as the facts are within the exclusive knowledge of the appellant as laid down by the Hon'bleSupreme. Court in case of PCIT (Central)-1 vs. NRA Iron & Steel (P) Ltd. [2019] 103 taxmann.com 48/262 Taxman 74/412 ITR 161 (SC) and I find that the onus is not discharged to the satisfaction of the AO. In view of the above discussion, the addition made by the AO of Rs.12,86,23,030 is sustained and the appeal on these grounds are treated as dismissed.”
After hearing the rival contentions and perusing the material available on record, we find that the Assessing Officer has confirmed the addition in a very cryptic manner by just reproducing the revisionary order from page 2 to 7 of the assessment order and thereafter in ten lines concluded that the summons u/s. 131 of the Act not complied by the assessee and served upon the subscribers but none attended. The assessee could not produce the Managing Director of the assessee company so the identity, creditworthiness of the subscribers and genuineness of the transaction remained unexplained. Similarly, the Ld. CIT(A) confirmed the addition on the ground that there was no compliance to notice u/s. 131 of the Act and assessee has failed to produce the evidences to prove the transactions with the shareholders. However we note that AO has not given any details as to when the summons were issued to the shareholders.
Nature Commercial Pvt. Ltd., AY 2008-09 26. We further find that in this case, the assessee has filed all the evidences comprising of confirmations from the subscribers, ITRs acknowledgements, audited financials of the subscribers, list of names and addresses of the subscribing companies, bank statements of the subscribers, master data of the subscribers down loaded from the MCA portal etc. We even note that notices were issued u/s. 133(6) by the Assessing Officer to 25 share subscribers during the original assessment proceeding and same were complied with by the subscribers. The copies of the details submitted before the Assessing Officer are available from page no. 41 to 171 of the paper book. Therefore, the addition cannot be made only on the ground that summons u/s. 131 of the Act were not complied with. The case of the assessee finds support from the decision of Hon’ble High Court in the case of Pr. CIT Vs. Sreeleathers 448 ITR 332, wherein the Hon’ble High Court has held as under: “'In the absence of any such finding, it is held that the order passed by the Assessing Officer was utterly perverse and rightly interfered by the Commissioner (Appeals). The Tribunal re-appreciated the factual position and agreed with the Commissioner (Appeals). The Tribunal apart from taking into consideration, the legal effect of the statement of AKA also took note of the fact that the notices which were issued by the Assessing Officer under section 133(6) to the lenders where duly acknowledged and all the lenders confirmed the loan transactions by filing the documents which were placed before the tribunal in the form of a paper book. These materials were available on the file of the Assessing Officer and there is no discussion on this aspect. Thus, the tribunal rightly dismissed the appeal filed by the revenue.”
The assessee has filed before us all these documents qua 39 share subscribers by way of paper book with written submissions and explained the creditworthiness and capacity of the subscribers to invest in the assessee company with all facts and details. Therefore, we are inclined to hold that the share subscribers were had adequate sources to invest in the assessee company. It is not the case of the Ld. CIT(A) or the Assessing Officer and that there was cash deposited into the bank accounts of the subscribers before making investments in the assessee company. These subscribers paid money through banking channel and the subscribers were having sufficient resources available. The case of the assessee also finds support Nature Commercial Pvt. Ltd., AY 2008-09 from the decision of Hon’ble Bombay High Court in the case of CIT Vs. Gagandeep Infrastructure Private Ltd. of 2014, wherein it has been held that proviso to sec. 68 of the Act has been introduced by Finance Act 2012 w.e.f. 01.04.2013 and, therefore, accordingly, applicable from AY 2013-14 onwards and not for the assessment years prior to AY 2013-14. The Hon’ble Court held that the Parliament did not introduce the proviso to sec. 68 of the Act with retrospective effect nor does the proviso so introduced state that it was introduced for removal of doubts or declaratory. The Hon’ble Court rejected the submission of the revenue that such large amount of share capital and share premium can raise the suspicion of genuineness of the shareholder as they are bogus. The Hon’ble court pointed out that the Hon’ble Apex Court in CIT vs. Lovely Exports Ltd. (2008) 216 CTR 195 (SC) in the context of pre-amended sec. 68 of the Act has held in the context of revenue prayers that the amount of share application money has been received from bogus shareholders then it is for the income tax to proceed by reopening the assessment of other shareholders and assessing them in accordance to law. It does not entitle the revenue to add the same in the assessee’s income as unexplained income of the assessee.
We also note that no addition can be made in case of non-compliance of the notice u/s. 133(6)/summon u/s. 131 of the Act though in the present case the notice u/s. 133(6) of the Act were complied in the reassessment proceeding which culminated into passing of order u/s. 143(3)/147 of the Act dated 29.04.2010. The addition cannot be made when the assessee has filed all the evidences before the authorities below and the authorities have failed to carry out any investigation on the said evidences and not pointed out any defect or deficiency. We also find that the case of the assessee finds support from the following decisions namely : (i) CIT Vs. Orissa Corporation Pvt. Ltd. (1986) 159 ITR 78 (SC); (ii) CIT Vs. Orchid Industries Ltd. 397 ITR 136 (Bom);(iii) Crystal Networks Pvt. Ltd. Vs. CIT 353 ITR 171 (Kol);(iv) ITO Vs. M/s. Cygnus Developers India Pvt. Ltd. (ITA No. 282/Kol/2012) and (v) Joy Consolidated Pvt. Ltd. Vs. ITO (ITA No. 547/Kol/2020.