RAJGUL CTRDITNVEST P.LTD,NEW DELHI vs. PRCIT,DELHI-7, NEW DELHI

3. At the time of hearing, Ld. Counsel for the assessee filed 02 Paper Book containing pages 1-180 in which he has attached the various documentary evidence for establishing the case of the assessee that the order passed by the Assessing Officer dated 16.12.2016 is not prejudicial to the interest of the revenue and the AO has partly examined the amount of Rs. 1,50,00,000/- received from M/s Virgin Capital Services Pvt. Ltd. Ld. Counsel for the assessee also filed written submissions supported by various case laws rendered by the Hon’ble Hon’ble High Court and the Tribunal. He stated that the assessee company was incorporated under the Companies Act, 1956 on 11.09.1996 and is also registered as Non Banking Finance Company and is engaged in the business of trading in shares and securities as well as lending money as ICD’s, Short Term Loans and Advances and investment in fixed deposits. He also draw our attention towards the details of transactions made by the assessee company during the last preceding 10 years which he has shown in the tabulated form at page no. 1 & 2 of his written submissions. He stated that assessee company has also filed the return of income alongwith Audited Report u/s. 44AB of the I.T. Act which was accepted as such in orders of assessment u/s. 143(1)/143(3) of the Act for the assessment years 2007-08 to 2012-13. For the assessment year in dispute, the assessee filed its return on 28.9.2009 declaring NIL income u/s. 139(1) of the I.T. Act alongwith computation of income, audited financial statements and tax audit report u/s. 44AB of the Act, which the assessee has placed at Page No. 43-58 of the Paper Book. He further submitted that assessment was framed u/s. 147/143(3) of the Act vide order dated 16.12.2016 wherein on detailed examination of the facts on record and after making all possible enquiries the AO had accepted the claim of the assessee then such an order of assessment could not be regarded as erroneous in as much as prejudicial to the interest of revenue merely 3 because the Ld. Pr. CIT had a different opinion and that too, without having established in any manner that, view adopted by the AO was an impossible view. He further submitted that AO had made enquiries during the assessment proceedings; the assessee had given detailed explanation and the AO on being was satisfied with the explanation of the assessee, such decision of the AO cannot be held to be ‘erroneous’, and therefore cannot be revised u/s. 263 of the Act, which the Ld. Pr. CIT has wrongly done. It is further submitted that AO even enquired from seller independently u/s. 133(6) of the Act from whom assessee has purchased shares which has been further sold to M/s Virgin Capital Services Ltd. And others. It is also submitted that assessee has sold the shares of M/s Allders Khannas (P) Ltd. To M/s Parikatha Buildwell Pvt. Ltd; Sadabhujs Realtors Pvt. Ltd; RG Enterprise; Sunita Bindal which has been accepted in order of assessment and has not been disputed in proceedings u/s. 263 of the Act. Hence, by no justification, it could be alleged that, the order of assessment framed by the AO is erroneous within the meaning of Section 263 of the Act and as such, notice is without jurisdiction. He further submitted that the observations in the notice are vague and only for making deeper enquiry and reconsidering the evidences already on record duly considered during assessment proceedings based on purported that fresh fact have been emerged subsequent to the order of assessment which is factually incorrect and untenable. He further submitted that in the instant case the Pr. CIT has not satisfied the twin conditions required for invoking the provisions of section 263 of the Act, hence, the impugned order passed u/s. 263 of the Act is without jurisdiction and, therefore, the same is illegal, untenable and unsustainable and needs to be set aside.

S.NO. PAGE/ANNEXURE DATE AND AMOUNT NAME OF NAME OF NAME OF OF CHEQUE/PO DUMMY PERSON TO THE INFORMATION ISSUED COMPANIES WHOM ISSUED MIDDLE BEARING CONTROLLED (BENEFICIARY) MAN / NO. BY SK JAIN MEDIATOR BY WHOM CHEQUE ISSUED 1 A-29, 36 PASGE 29952 DT. 1,50,00,000 m/S Virgin M/s Rajgul Bhallaji BACK SIDE 1911.08 Capital Services Creditnvest Pvt. CHEQUE BOOK Pvt. Ltd. Ltd. (Assessee)

Reason for information of belief was : • That particulars of all the investing companies are found recorded in the diary maintained in the regular course at the premises under control of Sh. SK Jain. Pass Books / cheques Books of all such investing companies have been found at the premises of Sh. SK Jain and Virender Jain. • That name of the assessee company appears on the document seized from the premise of Sh. S.K.Jain. • That the assessee has declared in its return of income that it has not increased its share capital amounting to Rs. 1,50,00,000/- which confirms the information received. During the course of assessment proceedings the assessee submitted details of its business and details of transactions with Virgin Capital Services Pvt Ltd It was noticed that assessee company was registered as. NBFC Company and engaged in the business of trade of shares/security The assessee contended that the alleged transaction with Mis Virgin Capital Services Pvt Ltd of Rs. 1,50,00,000/- was made on account of sale of shares. As per submissions the assessee had sold shares of different entities to M/s Virgin Capital Services Pvt. Ltd for which consideration of Rs. 1.5 cr was received. It was also observed that the said sale of share was offered for taxation in the profit & loss account by the assessee. Such submission of the assessee is verified from the profit and loss account filed by the assessee in which sale of shares has been shown at an amount of Rs. 4,38,54,348/- (schedule -11) & purchases has been shown at an amount of Rs. 4,42,07,159/-. 2.2 Further, vide its submission the assessee has contended the reason recorded that the assessee has taken accommodation entry in the form of share capita/. This fact is also verified that there is no increase in the share capital of the assessee during the relevant assessment year as compared to last year. This is tabulated below.

Head As per AY 2008-09 As per AY 2009-10 Share capital 74,54,000/- 74,54,0007- Reserve & surplus 42,24,0007- 42,24,0007-

2.3. Further in this case the assessee from the beginning of assessment proceedings kept on delaying in providing the details in order to take 9 the assessment at the fag end of time barring. Also at the regular interval reminders were sent to the assessee to file reply. Due to the fact that there was no reply from the part of the assessee penalty u/s 271(1)(b)was imposed on the assessee on 17.10.2016. The assessee started to file reply from 21.10.2016. Hence, the assessee has played delayed tactics. In the given circumstances the case details was examined and it was noticed that there was no increase in share capital/premium or any other liability head of the assessee during the year under consideration. 2.4 In the constraint of time pressure and keeping in view the reason for formation of belief as stated above, submission of the assessee and financial statement filed by the assessee the case was completed by the AO at returned income as there has been no increase under the head share capital/share premium or any other liability head in the case of the assessee for the relevant year. 2.5 However, as per the seized documents from the premise of SK Jain group it remains a fact that the assessee has taken accommodation entry for an amount of Rs. 1,50,00,000/- from the alieged entity M/s Virgin Capital Services Pvt Ltd of S. K Jain group. 2.6 Later on it has found that from the seized documents in the case of S K Jain that assessee has given an amount of Rs. 1,50,00,OOO/- to Sh. Bhalla Jee on 19.11.2008. Details of the same is as follows:- AMOUNT NAME OF DATE MODE INTERMEDIATORY 1,50,00,000 S. BHALLAJI 19.11.2008 CASH

This is the same amount which is reflected on the back side of page 36 of Annexure A-29 whose details is given above and is as below:- S.NO. PAGE/ANNEXURE DATE AND AMOUNT NAME OF NAME OF NAME OF OF CHEQUE/PO DUMMY PERSON TO THE INFORMATION ISSUED COMPANIES WHOM ISSUED MIDDLE BEARING CONTROLLED (BENEFICIARY) MAN / NO. BY SK JAIN BY MEDIATOR

WHOM CHEQUE ISSUED 1 A-29, 36 PASGE 29952 DT. 1,50,00,000 m/S Virgin M/s Rajgul Bhallaji BACK SIDE 1911.08 Capital Creditnvest Pvt. CHEQUE BOOK Services Pvt. Ltd. (Assessee) Ltd.

From the above table it is clear that amount, date and intermediary are same. Hence, the allegation as per reason recorded is supported by the corroborative evidence in the form of cash book. This fact could not be verified by the A. O. during the assessment proceedings for the reason of time constraint on the part of the assessee for playing delay tactics Moreover, it was also found that there is no increase in the share capital/premium or even any liability in the financials of the assessee. 2.7 The accommodation entry can also be in the form of sale of shares. In this case the assessee has admitted to have sold shares to the company namely M/s Virgin Capital Services Pvt. Ltd. which is intermediatory company controlled by Sh. S K Jain. This clearly establish that the assessee has taken accommodation entry in the form of sale of shares to S K. Jain group company by providing equal amount of cash of Rs. 1,50,00,000/- which is evident from cash book. 2.8 As stated above due to time barring pressure this aspect could not be examined by the A 0 as whether the said transaction of assessee in the shape of sale of shares to M/s Virgin Capital Services Pvt. Ltd was accommodation entry or not. This aspect is required to be examined and as it has been established by the Investigation Wing that entities controlled by S K Jain were providing accommodation entry in various form 3. In view of the above, the order passed by the Assessing Officer u/s 147/143(3) dated 16.12.2016 for A Y. 2009-10 is erroneous and prejudicial to the interest of the revenue. 4 Therefore, you are given an opportunity to show-cause why an order u/s 263 may not be passed to set right the above omissions. In case you intend to furnish submission, then you are 11 accorded an opportunity to submit the same. Your case is fixed for hearing on 18.5.2018 at 4.00 PM in my Room No. 394A, 3rd floor, CR Building, IP Estate, New Delhi. Please note that in case of failure to submit the above, the case will be decided on the basis of the facts and the evidences available on record and no further submission will be entertained." 5.3 The show cause notice dated 17.05.2018 was returned un-served, as is noted in the impugned order at page no. 6 of the impugned order. Thereafter the show cause notice again sent for compliance on 04.1.2018 and subsequent to above, counsel for the assessee sought adjournment on 5.10.2018, (page 169 of PB) and hearing adjourned to 30.10.2018 (page 170 of PB) and 15.11.2018 respectively. On 15.11.2018 no compliance was made by the counsel for the assessee. On 21.01.2019 an order u/s 263 of the Act was passed by the Ld. Pr. CIT-7, New Delhi by holding as under:- “4) On the said date of hearing, neither assessee/ AR attended the proceedings nor filed any written submission. In the light of above fact and considering the above proposal regarding information/ incriminating documents available with AO, there is no denial that the assessee company has not increased its shares capital neither its reserves towards share premium account has changed since immediately preceding previous year. However it is also established and admitted by assessee himself during re-assessment proceedings stated that a sum of Rs. 1,50,00,000/- had been received from M/s Virgin Capital Services Pvt Ltd. The contention of AO that accommodation Entry can be in the form of sale of shares can-not be denied. The incriminating seized document i.e. A-29, 36 page Back side contains the exact information in respect of taking entry from M/s Virgin Capital Services Pvt Ltd. which is controlled by an entry operator Sh. S K Jain & Ors. The seized document also contain name of middle man i.e. Bhallaji Whereby fact of receipt of cash against cheque payment is clearly mentioned recorded and is matching with actual cheque receipt in the 12 books of assessee company. 4.1) Accordingly the assessment order passed by the A.O. on 16.12.2016 is erroneous in so far pre- judicial to the interest of revenue and therefore set aside to the extent, with a specific direction to make the assessment afresh, after allowing opportunity to the assessee of being heard and after taking into account the provisions of section 68 of Act.” 5.4 After perusing the assessment order of the AO, show cause notice issued u/s. 263 of the Act and the impugned order issued u/s. 263 of the Act by the Ld. Pr. CIT. It is also noted that the assessment order dated 16.12.2016 is not erroneous in as much as prejudicial to interest of income since it is not based on either incorrect application of law or fact, non application of mind and there is nothing to show that the income assessed is not in accordance with law. We further note that AO had made enquiries during the assessment proceedings by issuing various notices alongwith questionnaire, as aforesaid and the assessee had given detailed replies/explanation and Assessing officer on being was satisfied with the explanation of the assessee and completed the assessment at NIL, hence, such decision of the AO cannot be held to be "erroneous"; and therefore cannot be revised u/s. 263 of the Act. We further note that Assessing officer even enquired from seller independently u/s. 133(6) of the Act from whom assessee has purchased shares which has been further sold to M/s Virgin Capital Services Ltd. and others. We further note assessee has sold the shares of M/s Allders Khannas (P) Ltd to M/s Parikatha Buildwell Pvt. Ltd.; Sadabhujs Realtors Pvt. Ltd.; RG Enterprises and Sunita Bindal which has been accepted in order of Assessment and has not been disputed in proceedings u/s. 263 of the Act. We further note that assessee has attached the copies of replies of the parties in response to notice u/s. 133(6) of the Act i.e. M/s Allders Khannas International (P) Ltd. Rely dated 25.11.2016; M/s Abha Fashions (P) Ltd. Rely dated 23.11.2016 alongwith its enclosures i.e. details of transaction in given form, copy of confirmation of accounts, copy of acknowledgement of return of income dated 13.9.2009 for assessment year 2009-10 and copy of bank statement and M/s GCP Capital Finance (P) Ltd. Reply dated 22.11.2016 alongwith its enclosures i.e. details of transaction in the given form, copy of confirmation of accounts, copy of acknowledgement of return of income dated 28.9.2009 for assessment year 2009- 10 (Page no. 171 – 180 of the Paper Book). We note that the show cause notice itself would show that it has not been denied or disputed that all relevant information including books of accounts have been furnished / obtained in the course of assessment proceedings. We note that section 263 of the Act cannot be invoked to make deeper enquiry. The Hon'ble High Court of Delhi in the case of CIT vs. Leisure Wear Exports Ltd. reported in 341 ITR 166 has held that where the assessment order been passed by the Assessing Officer after taking into account the assessee's submissions and documents furnished by him and no material whatsoever has been brought on record by the Commissioner which showed that there was any discrepancy or falsity in evidences furnished by the assessee, the order of the Assessing Officer cannot be set aside for making deep inquiry only on the presumptions and assumptions that something new may come out. We further note that Hon’ble High Court in the case of ITO vs. DG Housing Project Ltd. Reported in 343 ITR 329 has held that in cases of wrong opinion or wrong finding on merits, the CIT has to come to conclusion and himself decide that the order is erroneous, by conducing necessary enquiry, if required and necessary, before the order under section 263 is passed. We further note that it is not a case where conditions for exercise of power u/s. 263 of the Act stand satisfied since at best it is a case, where two views are possible (one view of the AO and other view expressed in the notice u/s. 263 of the Act). Thus, where two views are possible and the AO has taken a view with which Ld. Pr. CIT did not agree, the said order cannot be treated as an “erroneous” order in as much as prejudicial to the interest of the revenue unless the view taken by the AO is unsustainable in law as held by the Hon’ble Delhi High Court in the case of CIT vs. DLF Ltd. Reported in 350 ITR 555. We further observed that the reassessment order passed by Assessing Officer is not only prejudicial to the interest of revenue but is also erroneous learned Pr. CIT has to be preceded by some "minimal" inquiry. Thus in these circumstances it becomes incumbent on the Ld. PR. CIT to conduct such inquiry, which has not been conducted by the Ld. Pr. CIT at all. In this regard, we draw support from the decision of the Hon’ble Delhi High Court in the case PCIT v. Vinita Chaurasia reported in 394 ITR 758 (Del). It is noted htat that it has not been shown in the notice u/s. 263 of the Act that how the Assessment order resulted into prejudicial to the revenue therefore the same on this point is invalid, hence, the same is invalid. It is evident that the AO had conducted proper enquiries before framing the assessment. Infact, the Assessing Officer had made all necessary enquiries provided in law and thereafter alone had accepted claims of the assessee. Hence, by no justification, it could be alleged that, the order of assessment framed by the AO is erroneous within the meaning of Section 263 of the Act and as such, notice is without jurisdiction. We further note that Explanation to section 263 of the Act does not change the scope of section 263 of the Act, the Mumbai Tribunal in the case of Narayan Tatu Rane vs. ITO reported in 70 taxmann.com 227 has also held that in a case where learned Pr. CIT has not brought any material on record by making enquiries or verifications to substantiate his inference, the learned PCIT is not justified in holding that the impugned assessment order was erroneous. The relevant portion of the decision is as under:- "21. In the instant case, as noticed earlier, the AO has accepted the explanations of the assessee, since there is no fool proof evidence to link the assessee with the document and MIs RNS Infrastructure Ltd, from whose hands it was seized, also did not implicate the assessee. Thus, the assessee has been expected to prove a negative fact, which is humanely not possible. No other corroborative material was available with the department to show that the explanations given by the assessee were wrong or incorrect. Under these set of facts, the AO appears to have been satisfied with the explanations given by the assessee and did not make any addition. We have noticed that the Hon'ble Supreme Court has held in the case of Central Bureau of Investigation (supra) that the entries in the books of account by themselves are not sufficient to charge any person with liability. Hence, in our view, it cannot be held that the assessing officer did not carry out enquiry or verification which should have been done, since the facts and circumstances of the case and the incriminating document was not considered to be strong by the AO to implicate the assessee. Thus, we are of the view that the assessing officer has taken a plausible view in the facts and circumstances of the case. Even though the Ld Pr. CIT has drawn certain adverse 15 inferences from the document, yet it can seen that they are debatable in nature. Further, as noticed earlier, the Ld Pr. CIT has not brought any material on record by making enquiries or verifications to substantiate his inferences. He has also not shown that the view taken by him is not sustainable in law. Thus, we are of the view that the Ld Pro CIT has passed the impugned revision orders only to carry out fishing and roving enquiries with the objective of substituting his views with that of the AO. Hence we are of the view that the Ld Pr. CIT was not justified was not correct in law in holding that the impugned assessment orders were erroneous.” 5.4.1 In view of above, we note that notice u/s. 263 of the Act issued by the Pr. CIT is vague and only for making deeper enquiry and re-considering the evidences already on record duly considered during assessment proceedings based on purported proposal that fresh facts have been emerged subsequent to the order of assessment which is factually incorrect and untenable and the conditions or the factors enabling the Ld. Pr. CIT to invoke his jurisdiction uls 263 have not been satisfied. There must be positive material for the Commissioner to consider objectively and not subjectively that the order of the Assessing Officer was erroneous, in so far as it was prejudicial to the interest of revenue. To support this view, we draw support from decision of the Hon'ble Bombay High Court in the case of CIT vs. Gabriel India Ltd., reported in 203 ITR 108 wherein, it has been held that that there must be some prima facie material on record to show that the tax which was lawfully eligible has not been imposed or that by application of the relevant statute on an incorrect or an incomplete interpretation, a lesser tax than what was just, has been imposed. On the anvil of the aforesaid rule, it will be seen that the order made u/s 263 of the Act was entirely without any jurisdiction as there was absolutely no material to justify such an assumption nor has any material been brought on record or the materials which are on record have been disputed justifying such an assumption that the tax lawfully eligible has not been imposed. Hence, the same deserve to be cancelled. The judicial decision relied by the representatives of both the sides have been duly considered. In our considered view, we do not find any parity in the facts of the decisions relied upon by the Ld. CIT(DR) with the peculiar facts of the case in hand.