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Income Tax Appellate Tribunal, “D” BENCH : KOLKATA
Before: Hon’ble Sri N.V.Vasudevan, JM & Dr.Arjun Lal Saini, AM ]
This is an appeal by the Assessee against the order dated 28.01.2016 of Pr.CIT- 3, Kolkata passed u/s 263 of the Income tax Act, 1961 (Act) relating to AY 2012-13.
There is a delay of about 126 days in filing the appeal by the assessee. The director of the assessee has filed an affidavit in which it has been explained that the assessee was under a bona fide impression that the issue with regard to verification of receipt of share capital and share premium by the Assessee during the relevant previous year which was subject matter of revision in the impugned order of the CIT, the issue was set aside to the AO for consideration and that the assessee would get a fresh notice from the AO for verification of the said issue. In this regard our attention was drawn to the fact that even the AO issued a notice dated 03.06.2016 on the basis that direction in the order u/s 263 of the Act was to make proper inquiries with regard to the receipt of share capital and share premium by the assessee. However it later transpired that in the impugned order the CIT has directed the AO to add the share capital and share premium received by the M/s. Quantum Suppliers Pvt. Ltd. A.Yr.2012-13 Assessee during the previous year as unexplained credit. This aspect was not noticed and it was noticed only when the AO himself commenced the proceedings for passing an order giving effect to the directions of the CIT. The reason for the delay in filing has been explained thus by the Assessee. After considering the reasons given in the affidavit, we are of the view that there was a reasonable cause for delay in filing this appeal by the assessee and therefore the delay in filing the appeal is condoned.
The Assessee is a company. For A.Y.2012-13 an order of assessment u/s 143(3) of the Act was passed by the AO on 07.03.2014. The assessee had during the previous year received Rs.58.80 crores towards share premium on issue of share capital of Rs.1.20 crores .
The AO framed the assessment u/s 143 (3) of the Act accepting the transaction of receipt of share capital by the assessee as explained.
The CIT in exercise of his powers u/s 263 of the Act was of the view that the aforesaid order of the AO was erroneous and prejudicial to the interest of the revenue as the AO failed to examine the capacity of the person making investments and the genuineness of the transactions of receipt of share capital by the assessee. The CIT issued a show cause notice u/s 263 of the Act dated 11.01.2016. On the date fixed for hearing none appeared on behalf of the assessee. The CIT therefore passed an order u/s 263 of the Act on the basis of material available on record. The CIT in the aforesaid order observed as follows :- “7. As has been mentioned above, no enquiry was conducted during the course of assessment proceeding to ascertain genuineness of transactions and capacity / creditworthiness of the creditor share subscribers. The receipt of unusually high share premium without there being any justification for such high valuation itself establishes that the transaction is not genuine unless otherwise controverted. The assessee has not been able to, either at the time of assessment proceeding or during the instant proceeding, furnish any material or submit any explanation with respect to justification for huge share premium. The conclusion, therefore, is inevitable 2
M/s. Quantum Suppliers Pvt. Ltd. A.Yr.2012-13 unless controverted that the transactions are not genuine as what is apparent is not real. Thus, I have no hesitation in holding that the amount received by the assessee during the year in the form of share capital and share premium of Rs.1,20,00,000/- and Rs.58,80,00,000/- is nothing but assessee's own unaccounted money which has been shown to have been received in the garb of share capital and share premium. As the assessee has neither at the time of assessment proceeding nor during the instant proceeding been able to produce any material which should establish genuineness of the impugned transaction, adverse inference is inevitable as has been held in the case of MGF Finance Ltd. (254 ITR 499 Del.). Further, the A.O. accepted the claim of the assessee without establishing that the capacity and creditworthiness of the persons who subscribed to the share capital and share premium.
In view of the above, it is clear that the assessee despite opportunity having been given as per notice dated 11.01.2016 failed to produce any material or evidence to establish the capacity and creditworthiness of the persons who subscribed to share capital and share premium and genuineness of the transaction. Hence, the provisions of the section 68 of the LT. Act are attracted. I, therefore, hold that the amount of Rs.58,80,000/- and Rs.1,20,00,000/- is income from unaccounted sources of the assessee which is required to be brought to tax in the hand of the assessee for the A.Yr. 2012-13. The assessment order dated 07.03.2014 is cancelled and the A.O. is directed to pass consequential order in view of above finding and proceed further as per law.”
Aggrieved by the order of the CIT the assessee has preferred the present appeal before the Tribunal.
The ld. Counsel for the assessee brought to our notice ground no.5 and 6 raised by the assessee which reads as follows :- “5. For that the Ld. CI.T erred in enhancing the assessment by Rs. 60 Crores when in the show cause there was nothing to show that the Ld. CIT after making proper enquiry was of the opinion that the said amount of share capital should have been added in the total income.
6. For that the Ld. CI.T erred in making the addition of Rs. 60 Crores was unexplained cash credit when he himself was of the view that proper enquiry should have been made but did not make any enquiry and there was nothing on record to justify such addition and no reasonable person without making proper enquiry would have made the addition of Rs. 60 Crores.” 3
M/s. Quantum Suppliers Pvt. Ltd. A.Yr.2012-13 8. It was the plea of the learned counsel for the Assessee that the CIT ought not to have directed to make the addition of the sum received as share capital and share premium by the Assessee as unexplained and ought to have set aside the issue to the AO for fresh consideration by the AO as the grievance of the CIT was that the AO did not make proper enquiry before accepting the receipt of share capital and share premium by the Assessee as explained. We have heard the submissions made on behalf of the assessee. This Tribunal had dealt with the identical case in which identical issues had been considered and decided in the case of Subhlakshmi Vanijya Pvt. Ltd. Vs CIT in ITA No.1104/Kol/2014. This Tribunal has drawn the following conclusions :- “A. Contention of the assessee that since the AO of the assessee-company was not empowered to examine or make any addition on account of receipt of share capital with or without premium before amendment to section 68 by the Finance Act, 2012 w.e.f. A.Y. 2013-14 and hence the CIT by means of impugned order u/s 263 could not have directed the AO to do so, is unsustainable. B. Failure of the AO to give a logical conclusion to the enquiry conducted by him gives power to the CIT to revise such assessment order, by holding that :- i) the enquiry conducted by the AO in such cases can’t be construed as a proper enquiry; ii) CIT u/s 263 can set aside the assessment order and direct the AO to conduct a thorough enquiry, notwithstanding the jurisdiction of the AO in making enquiries on the issues or matters as he considers fit in terms of section 142(1) and 143(2) of the Act, which is relevant only up to the completion of assessment ; iii) Inadequate inquiry conducted by the AO in the given circumstances is as good as no enquiry and as such, the CIT was empowered to revise the assessment order ; iv) The order of the CIT is not based on irrelevant considerations and further in the present circumstances, he was not obliged to positively indicate the deficiencies in the assessment order on merits on the question of issue of share capital at a huge premium ; and v) the AO in the given circumstances can’t be said to have taken a possible view as the revision is sought to be done on the premise that the AO did not make enquiry thereby rendering the assessment order erroneous and prejudicial to the interest of the revenue on that score itself. C. In the given facts and circumstances of all such cases, the notices u/s 263 were properly served through affixture or otherwise. Further the law does not require the service of notice u/s 263 strictly as per the terms of section 282 of the 4
M/s. Quantum Suppliers Pvt. Ltd. A.Yr.2012-13 Act. The only requirement enshrined in the provision is to give an opportunity of hearing to the assessee, which has been complied with in all such cases. D. Limitation period for passing order is to be counted from the date of passing the order u/s 147 read with sec. 143(3) and not the date of Intimation issued u/s 143(1) of the Act, which is not an order for the purposes of section 263. In all the cases, the orders have been passed within the time limit. E. The CIT having jurisdiction over the AO who passed order u/s 147 read with section 143(3), has the territorial jurisdiction to pass the order u/s 263 andnot other CIT. F. Addition in the hands of a company can be made u/s 68 in its first year of incorporation. G. After amalgamation, no order can be passed u/s 263 in the name of the amalgamating company. But, where the intention of the assessee is to defraud the Revenue by either filing returns, after amalgamation, in the old name or otherwise, then the order passed in the old name is valid. H. Order passed u/s 263 on a non-working day does not become invalid, when the proceedings involving the participation of the assessee were completed on an earlier working day. I. Order u/s 263 cannot be declared as a nullity for the notice having not been signed by the CIT, when opportunity of hearing was otherwise given by the CIT. J. Refusal by the Revenue to accept the written submissions of the assessee sent after the conclusion of hearing cannot render the order void ab initio. At any rate, it is an irregularity. K. Search proceedings do not debar the CIT from revising order u/s passed u/s 147 of the Act.”
The ld. Counsel for the assessee admitted that those findings will apply to the present case also. He however submitted that in the group of cases decided by the Tribunal in which the lead order has been passed in the case of Subhlakshmi Vanijya Pvt. Ltd. (supra), the CIT in exercise of his powers u/s 263 of the Act had not directed the addition of the sum received as share capital and share premium but has set aside the order of AO and directed the AO to make a fresh enquiry with regard to the creditworthiness of the share applicants and the genuineness of the transactions. It was submitted by him that in the present case, no notice u/s 263 of the Act was served on the assessee personally before the impugned order was passed. The proper course for the CIT in such circumstances would have been to set aside the order of the AO dated 07.03.2014 and direct the AO to conduct fresh enquiry as was done in the group of 5 M/s. Quantum Suppliers Pvt. Ltd. A.Yr.2012-13 cases decided by this Tribunal in which the lead order was passed in the case of Subhlakshmi Vanijya Pvt. Ltd. (supra). It was his submission that there was no material before the CIT to come to a conclusion that the receipt of share capital and share premium was not satisfactorily explained by the assessee. He therefore prayed that the order u/s 263 of the Act should be quashed.
We have considered his submissions and are of the view that as was done in the similar group of cases which was considered by this Tribunal and in which the lead order was passed in the case of Subhlakshmi Vanijya Pvt. Ltd. (supra), the CIT ought to have set aside the order of AO and direct the AO to make fresh enquiry with regard to the receipt of share capital and share premium by the assessee during the previous year. As rightly pointed out by the ld. Counsel for the assessee, since the proceedings u/s 263 of the Act were concluded ex-parte, the Assessee had no occasion to place material to satisfactorily explain the receipt of share capital and share premium by the Assessee. There was however no material on the basis of which the CIT could have come to the conclusion that the receipt of share capital and share premium was not satisfactorily explained by the assessee. As rightly contended by the ld. Counsel for the assessee, the CIT ought to have set aside the order of the AO and directed the AO to conduct fresh enquiry on the lines indicated in the order of this Tribunal in the case of Subhlakshmi Vanijya Pvt. Ltd. (supra). We therefore modify the order of CIT and direct the AO to make fresh enquiry with regard to the receipt of share capital and share premium during the previous year after affording Assessee opportunity of being heard. With these observations the appeal of the assessee is treated as partly allowed.
In the result the appeal of the assessee is partly allowed as indicated above. Order pronounced in the Court on 22.03.2017.