RANISATI HOSIERY (P) LTD. ,KOLKATA vs. PCIT-4, KOLKATA. , KOLKATA

As per the note of the Registry, the appeal is time barred by 1722 days. A separate application for condonation of delay has been filed which is further supported with the affidavit of Shri Bhupendra Bansal, director of the assessee company. It has been explained that the impugned order dated 12.03.2019. That the copy of the order was not served upon the assessee. That the assessee came to know about the passing of the impugned order only after the receipt of the subsequent assessment order passed u/s 144 r.w.s. 263 of the Act. The assessee Assessment Year : 2012-13 Ranisati Hosiery (P) Ltd filed appeal against the said order bearing which was, however, withdrawn with permission to file afresh and this Tribunal had condoned the time consumed in prosecuting the appeal ITA No.84/Kol/2021 w.e.f. 09.3.2021 till the date of receiving of the copy of the Tribunal order dated 05.01.2022. Thereafter, the assessee obtained the copy of the impugned order of the ld. PCIT and filed the present appeal. It has also been submitted that the earlier period was also marred by the Covid Pandemic. Considering the above submissions, the delay in filing the present appeal is hereby condoned.

The assessee in this appeal has contested the very validity of the revision order passed by the ld. PCIT.

The brief facts of the case are that the assessee company e-filed its revised return of income on 18-03-2013 declaring nil total income. The case was selected for scrutiny under CASS citing the reason “large share premium received” and accordingly statutory notices under section 143(2) & 142(1) of the Income Tax Act, 1961 were issued calling upon the assessee to furnish details relating to the receipt of share capital of Rs.2170250/- along with premium of Rs.140429750/- totalling Rs.142600000/-. In response to notice under section 142(1), the assessee furnished requisitioned details & documents on 03.03.2015. Notices under section 133(6) were issued to the subscribers of shares for the purpose of verifying the identity, creditworthiness and genuineness of the transaction. All the share- subscribers filed replies in response to the notices issued u/s 133(6) of the Act. However, the Assessing Officer thereafter required the personal presence of the director of the assessee company and issued summons u/s 131 of the Act for personal deposition and to furnish the following details/documents:

Assessment Year : 2012-13 Ranisati Hosiery (P) Ltd i. Proof of photo identity/PAN card. ii. List of companies where they were Directors/shareholders from the AY 2008-09 till date with dates of appointment and DIN. iii. Acknowledgment of filing personal IT Return, copies of accounts iv. Proof of address v. Copy of bank statement of M/s. Ranisati Hosiery (P) Ltd reflecting the all transaction during the period 01.04.2011 to 31.03.2012 with complete narration & source of fund. vi. A write-up on justification of large share premium

Besides, the directors of the assessee were directed to produce the Director of investor companies along with their proof of photo identity and copy of bank statement of their company reflecting the all transaction during the period 01.04.2011 to 31.03.2012 with complete narration & source of fund.

In response to the said summons, the assessee company filed its submission on 11.03.2015 enclosing documents as requisitioned. Though the assessee has claimed that the director of the assessee duly appeared before the Assessing Officer but the Assessing Officer did not record his statement, however, the case of the Assessing Officer is that the directors did not come present for personal deposition as required by him. Thereafter, the assessment u/s. 143(3) of the Act was framed by the Assessing Officer vide order dated 24.03.2015 making addition of Rs.14,26,00,000/- under section 68 of the Act treating the said share capital as unexplained income of the assessee.

In respect of the said assessment order dated 19.08.2016, the then Ld. PCIT (the 2nd PCIT) again exercising his revision jurisdiction u/s 263 of the Act set aside the second assessment order dated 19.08.2016 passed u/s 143(3) r.w.s. 263 of the Act holding that the second assessment order dated 19.08.2016 passed u/s 143(3) r.w.s. 263 of the Act was erroneous and prejudicial to the interest of the Revenue as the Assessing Officer has failed to make proper and independent enquiries on various issued and again set aside the assessment order for de novo assessment. The ld. PCIT, inter alia, observed that “any order passed subsequent to order u/s 263 must be in favour of revenue. Either earlier assessed income should be enhanced or should be same as earlier order but with enhanced enquiries so that addition should be strengthen to Assessment Year : 2012-13 Ranisati Hosiery (P) Ltd pass the test of appellate proceedings. But here the assessment order passed u/s 143(3) r.w.s. 263 was erroneous as addition made u/s 68 on account of unexplained share capital/premium was not added back”.

Being aggrieved by the said order of the ld. PCIT, the assessee has come in appeal before us.

We have heard the rival contentions and gone through the record. The ld. AR has submitted that the first PCIT, vide order dated 01.06.2016 while setting aside the original assessment order dated 24.03.2015, had given specific directions for the purpose of verification of the identity, creditworthiness of the share subscribers and nature and genuineness of the transaction. That all the aforesaid directions of the PCIT were followed by the Assessing Officer while passing the second assessment order dated 19.08.2016 u/s 143(3) r.w.s 263 of the Act. In order to demonstrate that the Assessing Officer had conducted enquiry, the ld. AR brought our attention to the assessment order dated 19.08.2016, wherein, it has been mentioned that the assessee had produced copy of ITR, audited accounts, details of directors, registered office, details of increase of share capital, Form-2 & Form-5, shareholders list, bank a/c details and details of source of fund. The AO recorded in the order that he verified the books of account and bank statement. He, therefore, has submitted that the Assessing Officer had carried out the necessary investigations as per the directions of the ld. PCIT and that there was no error in the assessment order dated 19.08.2016 passed u/s 143(3) r.w.s 263 of the Act. The ld. AR has further submitted that the ld. Pr. CIT has wrongly exercised the revision jurisdiction second time to direct the Assessing Officer to re-examine the same issue which has already been duly examined and verified by Assessment Year : 2012-13 Ranisati Hosiery (P) Ltd the Assessing Officer. The ld. AR in this respect has placed reliance on various judicial decisions, copies of which has been placed on record.

The ld. DR, on the other hand, has relied on the impugned second revision order passed by the ld. PCIT and has submitted that failure on part of the Assessing Officer to conduct proper enquiries given revision jurisdiction to the ld. Pr. CIT u/s 263 of the Act.

After considering the rival contentions, we are of the view that the exercise of second revision jurisdiction by the subsequently posted PCIT, in this case, on the same issue was not justified. The original scrutiny assessment u/s 143(3) of the Act in this case was carried out on the limited issue of “large share premium received”. The Assessing Officer show-caused the assessee in relation to the aforesaid issue, whereupon, the assessee furnished various details as required by the Assessing Officer which included the documents relating to the identity of the share subscribers, copy of the bank accounts etc. to prove their creditworthiness and even copies of proof of filing Income Tax Returns and the relevant accounts. A writeup on justification of the large share premium was also furnished. However, the Assessing Officer without going into the said details and evidences simply made the addition of share capital and share premium only on the ground that the director of the assessee company in response to summons issued u/s 131 of the Act and further the assessee failed to produce the directors of the investor companies. However, the case of the assessee is that the director of the assessee company duly appeared before the Assessing Officer but the Assessing Officer did not mark his presence. However, all the documents as required by the Assessing Officer as mentioned in the notice issued u/s 131 of the Act were also duly furnished which fact has also been noted by the Assessing Officer in the original assessment Assessment Year : 2012-13 Ranisati Hosiery (P) Ltd order dated 24.03.2015. It is to be noted here that as per the settled law by various decisions of the Hon’ble High/Highest Courts, the Assessing Officer is required to examine the details and evidences furnished by the assessee and he is supposed to confront the assessee in respect of any document or evidence if he is not satisfied with the same and thereafter he has to form an opinion whether the assessee has discharged the initial onus vested upon him to prove the identity and creditworthiness of the subscribers and genuineness of the transaction. That the additions cannot be made solely on the ground that the directors of the assessee company/subscriber companies have not appeared without pointing out any defect or infirmity in the evidences furnished by the assessee. The then ld. PCIT observing that such an order of the Assessing Officer would not stand the judicial scrutiny of the higher courts asked the Assessing Officer to make further detailed investigations. The Assessing Officer thereafter examined the details and evidences furnished by the assessee and come to the conclusion that the assessee had successfully discharged his onus. Merely because in the assessment carried out pursuant to the revision order passed u/s 263 of the Act has resulted into acceptance of the claim of the assessee, that cannot be, in our view, a ground for exercise of revision jurisdiction for second time on the same issue. In this case, the earlier assessment order was set aside for de novo assessment which means that all the issues were open before the Assessing Officer. The assessee, under the circumstances, was entitled to furnish explanations and evidences on each of the issue that was open before the Assessing Officer and in relation to which the details were called upon by the Assessing Officer. There was neither any statutory power nor otherwise any other law requiring the Assessing Officer to only enhance or assess the same income which was earlier assessed. Such a proposition would Assessment Year : 2012-13 Ranisati Hosiery (P) Ltd be against the spirit of the law. When an assessment has been set aside or de novo assessment, all the issues in the assessment are open before the Assessing Officer, assessee as well also gets the right to plead, explain and furnish evidence on each of the issues. The outcome of the fresh assessment order is neither dependent nor can be based on the earlier assessment order which has been held to be erroneous and prejudicial to the interest of the revenue. If in the outcome of the fresh assessment order, the resultant assessed income is less than the earlier assessed income, the said order, by any fiction of law, cannot be termed as erroneous. Moreover, the assessee has already been subjected to two assessment proceedings, wherein, the assessee had already furnished necessary details and evidences and under the circumstances, the assessee cannot be burdened with further assessment proceedings on the same issue, by way of reopening of the assessment only on the ground that the certain more enquiries are required to be made by the Assessing Officer. Such an action cannot be held to be justified as under such circumstances, there will be no finality of the assessment and every time, the assessment order passed by Assessing Officer could be subjected to revision order by the ld. PCIT alleging that more enquiries are needed. The assessment cannot be kept open in perpetuity. There must be some finality to the proceedings. For exercising of revision jurisdiction for the second time or thereafter, there must be mention of specific and strong grounds warranting such revision of assessment order. The revision jurisdiction for want of mere enquiries cannot be exercised at the whims and wishes of the PCIT.

In this case, the assessee, during the year, raised share capital/premium amounting to Rs.14,25,00,000/- from 10 share applicants as detailed hereunder:

The assessee even during the original assessment proceedings not only furnished the required details and evidences to prove the identity, creditworthiness and genuineness of the transaction but also furnished a note, as required by the Assessing Officer, relating to the justification of large share premium. All the assessment records were available to the ld. PCIT during the course of second revision proceedings u/s 263 of the Act. The ld. PCIT has not discussed a word neither relating to any of the subscriber companies, nor as to how he was not satisfied with the write- up given by the assessee for justification of share premium. The impugned order of the ld. PCIT is a general order which can be applied to any assessment order holding that the necessary enquires have not been conducted by the Assessing Officer. No specific defect or infirmity or shortcomings have been pointed out by the ld. PCIT in relation to the evidence on record furnished by the assessee during assessment proceedings.

At this stage, it will be relevant to discuss the relevant provisions of Section 263 of the Act. “Section 263(1) of the Income- Tax Act reads as under:

As per the provisions of section 263 as enumerated above, after getting the explanation from the assessee, the Ld. PCIT was supposed to examine the contention of the assessee. Before passing an order of modifying, enhancing or cancelling the assessment, he was supposed either to himself make or cause to make such an enquiry as he deems necessary. The words “as he deems necessary”, in our view, do not mean that the Ld. PCIT is left with a choice either to make or not to make an enquiry. As per the relevant provisions of section 263 of the Act, it was incumbent upon the Ld. PCIT to make or cause to make an enquiry. So far as the words “as he deems necessary” are concerned, Assessment Year : 2012-13 Ranisati Hosiery (P) Ltd the said words suggest that the enquiries which are necessary to form a view as to whether the order of the Assessing Officer is erroneous and prejudicial to the interest of Revenue or not? A perusal of the impugned order of the ld. PCIT reveals that the Ld. PCIT had asked the assessee about the validity of the assessment order for want of necessary enquiries and verifications by the Assessing Officer relating to share application money and premium, to which the assessee had given a detailed reply. Once a point wise reply was given by the assessee, then a duty was cast upon the Ld. PCIT to examine the reply of the assessee and form a prima-facie opinion as to whether the order of the Assessing Officer was erroneous so far as it was prejudicial to the interest of Revenue. We further note that the Ld. PCIT did not raise any query as to what enquiries were made by the Assessing Officer before proceeding to pass the assessment order in question. In our view, once the Ld. PCIT had proceeded to make an enquiry regarding the genuineness of the claim of the assessee, he was supposed to make a prima-facie opinion which may not be a concluding opinion to hold that the order of the Assessing Officer in his view was erroneous so far as it was prejudicial to the interest of Revenue. The opinion of the Commissioner that the Assessing Officer had not made proper enquiries or verifications should be based on his objective satisfaction and not a subjective satisfaction from the assessment order. Merely because, the assessment order in question is not a detailed order that itself, does not mean that the Assessing Officer had not made enquiries in this respect. Admittedly, the Assessing Officer asked the assessee to furnish the necessary details from time to time which were duly furnished by the assessee and after considering the same the Assessing Officer passed the assessment order.

We further note that the issue is squarely covered in favour of the assessee by the decision of the Co-ordinate Bench of ITAT Kolkata in the case of Amritrashi Infra (P) Ltd. vs PCIT in Assessment Year 2012-13; order dt. 12/08/2020, wherein the Tribunal in almost identical circumstances, while relying upon the various decisions of the Higher Courts had concluded as follows:

Lastly, coming to the observations of the Second Ld. Pr.CIT that the assessment order passed by the AO is erroneous in so far as it is prejudicial to the interest of the Revenue in accordance with Explanation 2(c) to section 263(1) of the Act.[ For ready reference it is reproduced.] Explanation 2 under section 263 of the Act reads as under:- For the purpose of this section, it is hereby declared that an order passed by the Assessing Officer shall be deemed to be erroneous in so far as it is prejudicial to the interests of the revenue, if in the opinion of the Principal Commissioner or Commissioner,- (a).......... (b)........... (c)the order has not been made in accordance with any order, direction or instruction issued by the Board under section 119; or 58. However, we note that the Ld. CIT(A) has made a bald statement that the AO's assessment order attracts Explanation 2(c) u/s. 263 of the Act. However, he failed to spell out in his impugned order how the action of AO while framing the assessment order is Assessment Year : 2012-13 Ranisati Hosiery (P) Ltd not in accordance to any order, direction or instruction issued by the Board under section 119 of the Act. So, the deeming fiction as envisaged in Explanation (2) u/s. 263 of the Act cannot be used to interfere with the order of AO. This action of Ld. Pr. CIT is bad for non- application of mind. In the light of the aforesaid discussion and case laws cited supra, we find merit in the appeal filed by the assessee, therefore, we allow the appeal of assessee on the ground that since the Ld. Pr CIT has exercised his revisional jurisdiction u/s. 263 without satisfying the condition precedent as stipulated in section 263 of the Act. Therefore, we hold that the impugned action of the Ld. Pr. CIT is without jurisdiction and, therefore, is null in the eyes of law and consequently it is quashed and since we allowed ground number 2&3 of the original grounds raised

In the result, appeal of the assessee stands allowed.