S.P.TEXTWORLD PRIVATE LIMITED,MUMBAI vs. PR.CIT-8, MUMBAI

A perusal of the aforesaid reasons reveal that as per the Assessing Officer, consequent to search action u/s. 132 of the Act in the case of one Shri Shirish C Shah on 9.04.2013, it came to light that various concerns controlled by him were indulging in providing accommodation entries in the form share capital, share premium, share application money, unsecured loans, Long term capital gain and Short term capital gain etc. Thereafter, the Assessing Officer has specifically recorded that in the context of the assessee i.e. M/s. S P Textworld Private Limited, the said Shri Shirish C Shah accepted in his statement recorded, that bogus entries were provided. The reasons further referred to the details of such amounts totalling to ` 1,85,00,000/-. In the ensuing assessment finalized u/s. 143(3) r.w.s. 147 of the Act the Assessing Officer called for various details with regard to the share application money received by the assessee and examined the same. The Assessing Officer accepted the transactions as returned by the assessee and therefore, no addition on account of receipt of share application money was made.

The aforesaid assessment has been found to be erroneous by the Commissioner and the relevant show cause notice issued by him in this regard is placed at pages 39 to 40 of the paper-book, which is dated 28.08.2017. The sum and substance of the contents of show cause notice show that as per the Commissioner the re-assessment was finalized on 30.12.2016 (supra), “without proper enquiry”, qua the share premium of ` 1,40,00,000/- received by the assessee from bogus concerns controlled by Shri Shirish C Shah. The record also shows that the action of the Commissioner was sought to be resisted by the assessee and in this context the written submissions made to the Commissioner have been reproduced by him in the impugned order.

At the time of hearing, the learned representative has taken us through the written submissions, copies of which have been placed in the paper-book filed before us. After considering the explanations preferred by the assessee, the Commissioner was satisfied that in the re-assessment proceedings the Assessing Officer has not made proper enquiries in as much as the confession of Shri Shirish C Shah of having arranged book entries to the assessee company has not been enquired and the claim of the assessee has been accepted as such. For the said reason he set aside the assessment order dated 30.12.2016 (supra), with a direction to make assessment afresh after considering the finding of the search carried out u/s. 132(1) of the Act in the case of Shri Shirish C Shah. Against such decision of the Commissioner, the assessee is in appeal before us.

Before us, the learned representative for the assessee referred to the queries raised by the Assessing Officer dated 6.12.2016 as well as 20.12.2016 in the course of re-assessment proceedings and referred to the written submissions made to the Assessing Officer dated 9.12.2017, 26.12.2016 & 28.12.2016, to point out that the entire material relatable to the subscriber companies was furnished to the Assessing Officer. It was contented that it was not a case where the re-assessment order was made without making any enquiries. Furthermore, the learned representative pointed out that the re-opening of assessment was itself made on account of the finding of search in the case of Shri Shirish C Shah and therefore, once in the ensuing re-assessment proceedings, the requisite details have been called for and examined by the Assessing Officer, it cannot be said that the assessee was made without making proper enquiries. It is also pointed out that the Commissioner has not stated as to what particular enquiry was not made and, further, if at all any enquiry was liable to be made, the Commissioner ought to have made it himself before labelling the assessment order, dated 30.12.2016 (supra), as erroneous and prejudicial to the interests of the Revenue within the meaning of section 263 of the Act.

On the other hand, the learned DR appearing for the Revenue has contended that the Commissioner made no mistake in holding the assessment order to be erroneous and prejudicial to the interests of the Revenue, in as much as the reasons for re-opening of assessment, viz., the confession of Shri Shirish C Shah was not enquired into by the Assessing Officer in the ensuing proceedings.

We have carefully considered the rival submissions. Section 263 of the Act empowers the Commissioner to call for and examine the record of any proceeding under the Act and pass such order thereon as the circumstances of the case justify, including an order enhancing or modifying the assessment or cancelling the assessment and directing a fresh assessment, if he considers that any order passed by the assessing officer is erroneous insofar as it is prejudicial to the interests of the Revenue. Of course, the power so granted to the Commissioner is circumscribed by the requirement of giving assessee an opportunity of being heard and after making or causing such enquiries as he may deem necessary. The phraseology of the section 263 of the Act itself makes it clear that the power of the Commissioner is based on fulfilment of two pre-requisites namely, (i) the order of the Assessing Officer being erroneous; and (ii) such order being prejudicial to the interests of the Revenue. It is judicially well-settled that both the conditions are required to be cumulatively satisfied before a valid jurisdiction can be assumed by the Commissioner u/s. 263 of the Act. At this stage, we may refer to the judgment of Hon’ble Supreme Court in the case of Malabar Industrial Co. Ltd. vs. CIT (243 ITR 83), wherein it has been held that orders passed without application of mind would justify recourse to section 263 of the Act.

If we come back to the facts of the instant case, it clearly emerges that the error sought to be pointed out by the Commissioner is that the confession made by Shri Shirish C Shah, which prompted the initiation of proceedings u/s. 148 of the Act, was not enquired into by the Assessing Officer in the ensuing re-assessment proceedings. The said error brought out by the Commissioner, in our view, is clearly borne out of the record. For this purpose, we may refer to the extract of the reasons recorded by the Assessing Officer before issuance of notice u/s. 148 of the Act, which we have reproduced in the earlier para. In the said extract, it is clearly averred that Shri Shirish C Shah in the case of the assessee has accepted in his statement recorded that he and his companies are providing only bogus entries for the “One Time Entry” to the beneficiary companies. This is evident from the examination and analysis of the seized and impounded materials of Shri Shirish C Shah.

Though the assessee has taken us copiously through various queries raised by the Assessing Officer during the assessment proceedings and replies of the assessee thereof, but there is no material to establish that the confession of Shri Shirish C Shah referred to in the reasons for re-opening, was confronted or enquired into by the Assessing Officer in such re-assessment proceedings. Pertinently, whether or not a particular item or issue has been made a subject matter of enquiry in the assessment proceedings is a matter of fact and it ought to be discernible from examination of record. In the present case, it clearly stands out that the Assessing Officer did not enquire into this aspect of the matter, which was crucial because it was the foundation formulated by him at the time of re-opening of assessment to form an opinion that there was escapement of income qua the share capital and premium received from four companies controlled by Shri Shirish C Shah. Thus, non-enquiry by him on the above lines did render the subsequent assessment to be erroneous as it can be said to be made without application of mind which lead to prejudice to the interests of the Revenue, in as much as the confession of Shri Shirish C Shah was not confronted or enquired in the reassessment proceedings. Therefore, having regard to the facts of the case, we uphold the action of the Commissioner in principle.

Before parting, we may refer to certain case laws cited by the learned representative in support of his arguments. Firstly, the learned representative relied upon the judgment of Hon’ble Bombay High Court in the case of CIT vs. Nirav Modi (390 ITR 292) to contend that where the assessment has been made after calling for sufficient details and enquiries, recourse to section 263 of the Act is not justified. We find that the proposition set out in the said judgment is not applicable in so far as the facts of the present case are concerned. As we have noted earlier, in the present case, there is an apparent lack of inquiry qua the very reason for which the re-opening of assessment was made and, therefore, it is not a case where it can be said that impugned assessment dated 30.12.2016, was made after sufficient enquiry. Therefore, the said decision does not help the case of the assessee.

The second decision relied upon by the learned representative is the judgment of Hon’ble Delhi High Court in the case of Director of Income-tax vs. Jyoti Foundation (357 ITR 388). The said decision has been relied upon for the proposition that where the revisionary authority finds lack of enquiry by the Assessing Officer, the assessment order cannot be set aside on that count before the revisionary authority himself makes the relevant enquiry. In our view, the factual situation in the instant case does not invite the proposition upheld by Hon’ble Delhi High Court in the case of Jyoti Foundation (supra). As we have noted earlier, the fact situation in the present case stands on a totally different footing, in as much as this is a case where the error pointed out by the Commissioner is the non-enquiry by the Assessing Officer about the reason which has been formulated by the Assessing Officer himself to reopen the assessment. We find that in the instant case in the re-assessment proceedings the Assessing Officer has given a complete go-by to the specific aspect of confession by Shri Shirish C Shah noted in the reasons recorded and, therefore, it is case where the Commissioner has merely noted inaction of the Assessing Officer in not enquiring about the reasons which he has recorded suo moto in order to initiate re-assessment proceedings. Thus, the facts in this case stand on a different footing than those which were before Hon’ble Delhi High Court in the case of Jyoti Foundation (supra).

The third decision relied upon by the learned representative for the assessee is the judgment of Hon’ble Allahabad High Court in the case of CIT vs. Krishna Capbox (P.) Ltd.(372 ITR 310). The said decision has been relied upon for the proposition that merely because the Assessing Officer has not made a detailed discussion in the assessment order would not render the assessment order erroneous within the meaning of section 263 of the Act if otherwise the assessment has been completed after making the relevant enquiries. In our view, the said decision does not help the assessee in as much as in the present case the error sought to be made is lack of enquiry and not the fact of there being a cryptic discussion in the assessment order. Thus, the said decision also does not help the case of the assessee.

Further, the learned representative relied upon the decision of the Co- ordinate Bench, dated 19.01.2018, in the case of M/s. Indus Best Hospitality & Realtors Pvt. Ltd. vs. Pr. CIT in for A.Y. 2012-13, and drew out attention specifically to the discussion in para nos. 16 & 17 thereof. The said decision has been relied upon for the proposition that in the absence of enquiry caused by the Commissioner himself to find out the correctness of the stand of the Assessing Officer, the assessment order cannot be said to be erroneous under the provisions of section 263 of the Act. The aforesaid proposition relied upon by our Co-ordinate Bench in the case of Indus Best Hospitality & Realtors Pvt. Ltd.(supra), cannot be disputed and there is no quarrel on the same. However, as our earlier discussion shows, the error sought to be made out in the instant case stands on a completely different footing. At the cost of repetition, it may be noted that in the present case, the Commissioner has demonstrated lack of enquiry by the Assessing Officer qua the very reason on which the assessment was re-opened by the Assessing Officer. Thus, this is a case where the assessment order is passed without making enquiries which should have been made. The said fact situation is on a completely different footing than the position before our Co-ordinate Bench in the case of M/s. Indus Best Hospitality & Realtors Pvt. Ltd.(supra), therefore, the said decision does not help the case of the assessee.

Lastly, the learned representative has also relied on the decision of Co- ordinate Bench, dated 17.12.2015, in the case of Elder IT Solutions Pvt. Ltd. vs. Pr. CIT in for A.Y. 2010-11. In the said decision the only aspect which has been referred to is the reliance placed by the Bench on the decision of the Tribunal in the case of assessee before them for earlier period of A.Y. 2009-10. Therein also, the issue was relating to the assessment finalized by the Assessing Officer accepting as explained the share capital and premium thereof received by the assessee from four different concerns. When the Commissioner invoked the revisionary powers u/s. 263 of the Act the matter travelled to the Tribunal. The Tribunal noted that the assessment order revealed that the Assessing Officer had examined the financial accounts of all the four concerns from whom the share capital and share premium has been received and also examined those parties. The Tribunal noted that when the entire record of assessment including the verification exercise carried on by the Assessing Officer was available with the Commissioner, which showed that the requisite enquiries were made, including examination of the parties, section 263 of the Act could not be justified on the ground of non-making of enquiries.

We have carefully perused the said decision and find that the proposition articulated by the Co-ordinate Bench in the case of Elder IT Solutions Pvt. Ltd.(supra), is not attracted to the facts of the present case. Quite clearly in the case of Elder IT Solutions Pvt. Ltd. (supra), the AO was found to have not only examined the relevant financial record but also examined the parties from whom the share capital and share premium was received. Now this factual situation is in contrast to the situation before us wherein it is apparent that in the impugned re- assessment proceedings, the Assessing Officer has not carried out any enquiry qua the confession made by Shri Shirish C Shah of having given bogus entries to the assessee qua the share capital and share premium in question. Therefore, the said decision does not help the case of the assessee in the present case.

On the other hand, the learned DR appearing for the Revenue has drawn support from the decision Kolkata Bench of the Tribunal, dated 30.07.2017, in the case of M/s. Subhlakshmi Vanijya Pvt. Ltd. vs. CIT & Ors in & Ors for A.Y. 2009-10.

In view of our aforesaid discussion, in the final analysis, we uphold the action of the Commissioner in treating the assessment order dated 30.12.2016 (supra), as erroneous in so far as it is prejudicial to the interests of the Revenue u/s. 263 of the Act, on the ground that the Assessing Officer not having made proper enquiries qua the share capital subscribed by the four parties of Shri Shirish C Shah controlled group..

In the result, the appeal of the assessee is dismissed.