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

आयकर अपील�य अ�धकरण, कोलकाता पीठ ‘सी’, कोलकाता IN THE INCOME TAX APPELLATE TRIBUNAL “C” BENCH KOLKATA �ी संजय गग�, �या�यक सद�य एवं �ी �गर�श अ�वाल, लेखा सद�य के सम� Before Shri Sanjay Garg, Judicial Member and Shri Girish Agrawal, Accountant Member I.T.A. No.1278/Kol/2023 Assessment Year : 2012-13 Ranisati Hosiery (P) Ltd…….….…………............…...……………....Appellant Siddha Weston, Room No.126, 9, Weston Street, Kolkata – 700013. [PAN: AAFCR2959B] vs. PCIT-4, Kolkata…………..….............................................…..…..... Respondent Appearances by: Shri Rajeeva Kumar & Giridhar Dhelia, AR, appeared on behalf of the appellant. Shri Rakesh Kumar Das, CIT-DR, appeared on behalf of the Respondent. Date of concluding the hearing : January 31, 2024 Date of pronouncing the order : March 18, 2024 आदेश / ORDER संजय गग�, �या�यक सद�य �वारा / Per Sanjay Garg, Judicial Member: The present appeal has been preferred by the assessee against the revision order dated 12.03.2019 of the Principal Commissioner of Income Tax-4, Kolkata [hereinafter referred to as ‘PCIT’] passed u/s 263 of the Income Tax Act (hereinafter referred to as the ‘Act’). 2. 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

I.T.A. No.1278/Kol/2023 Assessment Year : 2012-13 Ranisati Hosiery (P) Ltd filed appeal against the said order bearing ITA No.84/Kol/2021, which was, however, withdrawn with permission to file afresh and this Tribunal had condoned the time consumed in prosecuting the appeal ITA No.84/Kol/2021 w.e.f. 09.3.2021 till the date of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. 3. The assessee in this appeal has contested the very validity of the revision order passed by the ld. PCIT. 4. 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:

I.T.A. No.1278/Kol/2023 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

I.T.A. No.1278/Kol/2023 Assessment Year : 2012-13 Ranisati Hosiery (P) Ltd 7. Thereafter, the ld. PCIT invoking his revision jurisdiction u/s 263 of the Act observed that the case of the assessee was selected for scrutiny assessment on the issue “large share premium received”. That though the assessee had furnished the requisite details and evidence in response to the show-cause notices issued by the Assessing Officer, however, the Assessing Officer without examining the same made the addition of share capital. The ld. PCIT in this respect further observed that the Assessing Officer did not gather any adverse inference from the reply/documents furnished by the assessee. The ld. PCIT observed that the assessment was framed ignoring the evidences on record, ignoring the replies filed u/s 133(6), non-compliance of order-sheet, making allegation of non-compliance, ignoring that the assessee had discharged its onus. That the Assessing Officer jumped to the conclusion that the aforesaid share capital was unexplained income of the assessee with pre-conceived mind-set. He observed that the addition made by the Assessing Officer would not stand the judicial scrutiny of the higher appellate courts and, therefore, the order of the Assessing Officer was erroneous and prejudicial to the interest of the revenue. The ld. PCIT, therefore, vide order dated 01.06.2016 passed u/s 263 of the Act set aside the original assessment order dated 24.03.2015 passed u/s 143(3) of the Act for de-novo assessment and directed the Assessing Officer to specifically examine the source of share application money, identity of investors, nature and genuineness of the transaction. The ld. PCIT further directed that to carry out the aforesaid investigation, the Assessing Officer will carry out proper examination of books of accounts including Bank accounts of assessee as well as investors.

I.T.A. No.1278/Kol/2023 Assessment Year : 2012-13 Ranisati Hosiery (P) Ltd 8. Pursuant to the revisional order dated 01.06.2016 passed by the Ld. PCIT, the Assessing Officer framed order u/s. 143(3) read with section 263 of the Act on 19.08.2016, observing as under:

“The assessee company e-filed its return of income for AY 2012- 13 on 18.03.2013 disclosing total income Nil. The case was selected for scrutiny. Notice u/s.143(2) & 142(1) were issued and served on the assessee. Order u/s 143(3) was passed on 24.03.2015. Order u/s 263 dt.01.06.2016 was passed by Ld. Pr. CIT-4, Kolkata directing the AO to reassess the case. Notice u/s 142(1) was issued on 17.08.2016 and served on the assessee. The case was fixed for hearing. Shri Raghwendra Kumar, Advocate & A/R appeared on 19.08.2016 and produced copy of ITR, audited accounts, details of directors, share trading, registered office, details of increase of share capital, Form-2 & Form-5, shareholders list, bank a/c details. The above details were examined. The case was discussed & heard. The genuineness, identity, creditworthiness of the share subscribers were verified from the documents produced. The source of fund was verified. A/R explained the source of fund.”

I.T.A. No.1278/Kol/2023 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”.

I.T.A. No.1278/Kol/2023 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.

I.T.A. No.1278/Kol/2023 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

I.T.A. No.1278/Kol/2023 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.

I.T.A. No.1278/Kol/2023 Assessment Year : 2012-13 Ranisati Hosiery (P) Ltd

Sl Name, Address No. of Face Premium Total & PAN of the shares Value subscribers 1. Mohit Barter (P) 1000000 1000000 - 1000000 Ltd PAN:AAHCM5927 A 2. Amarlaxmi 1000000 1000000 - 1000000 Conclave (P) Ltd PAN:AAKCA3661 N 3. Aakarshan 63250 63250 126436750 126500000 Dealers (P) Ltd PAN: AAJCA4948F 4. Aspiration 1000 1000 1999000 2000000 Commercial (P) Ltd. PAN:AAICA2224 K 5. Vista Nirman (P) 500 500 999500 1000000 Ltd PAN:AADCV5473 G 6. Wezard Infra 500 500 999500 1000000 Developers (P) Ltd PAN: AABCW0060C 7. Bholanath 1000 1000 1999000 2000000 Dealcom (P) Ltd PAN: AADCB9871E 8. Indraloke Realty 1000 1000 1999000 2000000 (p) Ltd PAN: AACCI5302A 9. Ford Developers 2500 2500 4997500 5000000 (P) Ltd PAN: AABCF5896R 10 Merit Vanijya (P) 500 500 999500 1000000 . Ltd PAN: AAGCM3672B 20,70,25 20,70,25 14,04,29,75 14,25,00,00

I.T.A. No.1278/Kol/2023 Assessment Year : 2012-13 Ranisati Hosiery (P) Ltd 0 0 0 0

(1) The Commissioner may call for and examine the record of any proceeding under this Act, and if he considers that any order passed therein by the 2 Assessing] Officer is erroneous in so far as it is prejudicial to the interests of the revenue, he, may, after giving the assessee an opportunity of being heard and after making or causing to be made such inquiry as he deems necessary, 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. ………”

I.T.A. No.1278/Kol/2023 Assessment Year : 2012-13 Ranisati Hosiery (P) Ltd 16.1. The sum and substance of the above reproduced section 263(1) can be summarized in the following points: 1) The Commissioner may call for and examine the record of any proceeding under the Act; 2) If he considers that the order passed by the AO is (i) erroneous; and (ii) is prejudicial to the interest of Revenue; 3) He has to give an opportunity of hearing in this respect to the assessee; and

4) He has to make or cause to make such enquiry as he deems necessary; 5) He may pass such order thereon as the circumstances of the case justify including, (i) an order enhancing or, (ii) modifying the assessment or (iii) cancelling the assessment and directing a fresh assessment.

I.T.A. No.1278/Kol/2023 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.

I.T.A. No.1278/Kol/2023 Assessment Year : 2012-13 Ranisati Hosiery (P) Ltd 18. It is pertinent to mention here that a deeming fiction has been created in section 263 of the Act by the amendment made by Finance Act, 2015 w.e.f. 01.06.15 wherein it has been mentioned that where the Commissioner is of the opinion that the Assessing Officer had passed the order without making enquiries or a claim has been allowed without enquiring into the claim or that the same is not in accordance with any order or direction or instruction issued by CBDT, that shall be deemed to be erroneous in so far as its prejudicial to the interest of Revenue. The said deeming provisions, in our view, are not applicable for the assessment year under consideration i.e., A.Y. 2012-13 18.1. Even otherwise, a perusal of the revision order passed by the ld. PCIT shows that the ld. PCIT has not pointed out any error or discrepancy in the evidence furnished by the assessee and without examining such evidence and without counter questioning the assessee on the relevant points and even without considering the submission of the assessee furnished in reply to the show-cause notice, the ld. PCIT, in our view, was not justified in setting aside the order, simply stating that in his view more enquiries were needed to be carried out by the Assessing Officer. As observed above, the ld. PCIT without examining the details of the share applicants and the evidence furnished by the assessee has passed a general order observing that in his view the order passed by the Assessing Officer was on an incorrect assumption of facts or incorrect application of law without mentioning as to what facts were incorrect what was the incorrect law, that was applied by the Assessing Officer. 18.2. The ld. PCIT, taking shelter in Explanation 2(c) to Section 263(1) of the Act, held that the order of the Assessing Officer was erroneous and prejudicial to the interest of the revenue on the ground of lack of

I.T.A. No.1278/Kol/2023 Assessment Year : 2012-13 Ranisati Hosiery (P) Ltd enquiry, which, in our view, is a general observation and no specific observation has been made in respect of any of the details or evidence furnished by the assessee and as to why the ld. PCIT was not satisfied about such details/replies furnished by the assessee. Simply because the ld. PCIT felt that the Assessing Officer should have made further enquiries on the same issue or that the case was to be examined from some another angle, the same, in our view, cannot be a valid ground to set aside the assessment order. If such an action is allowed by the ld. PCIT in revision jurisdiction then, there would be no end to litigation and there would not be any finality to the assessment. The Explanation 2(c) to Section 263(1) of the Act does not give unbridled powers to the ld. PCIT to simply set aside the assessment order by saying that the Assessing Officer was required to make further enquiries without pointing out as to what was lacking in the enquiries made by the Assessing Officer and why the ld. PCIT was not satisfied with the reply and evidence furnished by the assessee. 19. 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 ITA No. 838/Kol/2019; 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:

“56. To sum up, we find from the above said facts that the Second AO has conducted enquiry as directed by the First Ld. Pr. CIT on the specific subject matter i.e. share capital and premium collected by the assessee-company. Therefore, the finding of Second Pr. CIT that the Second AO has not conducted enquiry is incorrect and is flowing from suspicion only. And as discussed, the allegation/fault pointed out by the Second Ld. Pr. CIT that the Second AO failed to collect total facts also cannot be accepted for the simple reason that Ld. Pr. CIT has not spelt out in the impugned order what he meant

I.T.A. No.1278/Kol/2023 Assessment Year : 2012-13 Ranisati Hosiery (P) Ltd by total facts or in the alternative when the assessee has discharged its onus, as required by the law in force in this AY 2012-13, then the Ld. Pr. CIT ought to have called for which ever additional documents/materials or issued summons or issued notices and collected those facts which according to Second Ld. Pr. CIT, the AO omitted to collect and then demonstrated that those actions/documents which he collected in that process gave result to a different finding of fact which will turn upside down the claim of the assessee and thus able to show that the actions/omission of AO in conducting the investigation was erroneous, which unfortunately is not the case before us. And equally bad is the bald allegation/fault that second AO has not collected total facts cannot be accepted being vague and based on conjectures and surmises and so meritless. Since the assessee company has discharged its onus as discussed supra, and still if the Second Pr. CIT had to find the order of Second AO erroneous for lack of enquiry or for not collecting the entire facts, then the Second Pr. CIT ought to have called for the additional facts which he thinks that the Second AO has not collected from the assessee or the shareholders and then explained in his impugned order as to what effect those additional documents would have made on the second assessment order/reassessment order or in other words the impact on the decision making process of framing the second assessment order due to the failure of second AO's omission to collect the additional documents. However, we note that the Second Pr. CIT has not carried out any such exercise or even spelled out in his impugned order, which all documents the second AO failed to collect for considering the total facts; and even if we presume he has conducted such an exercise, then he has not been able to bring out any adverse factual finding to upset the view of Second AO. So we find no merit in the vague allegation of second Pr. CIT that the second AO has not collected the full facts necessary to decide the issue of share capital & premium.So we note that the Second AO, the assessing authority who is a quasi- judicial office has discharged his dual role as an investigator as well as an adjudicator. Looking from another angle of doctrine of merger canvassed before us, we note from the facts of this case that the second Ld. Pr. CIT - 4 by passing the second revisional order dated 14.03.2019 has substituted the First Pr. CIT's order passed u/s. 263 of the Act dated 23.08.2016 with his own order which he cannot do since the second assessment order/re-assessment of the Second AO dated 07.12.2016 was pursuant to the first revisional order of the First Ld. Pr. CIT and on the very same subject matter on which specific directions/instructions were given by the First Ld.

I.T.A. No.1278/Kol/2023 Assessment Year : 2012-13 Ranisati Hosiery (P) Ltd Pr.CIT, which direction since having been complied by the AO, brings into operation the doctrine of merger the subject matter i.e. share capital & premium collected by assessee company. Resultantly the second Ld. Pr.CIT, again cannot rake-up the same subject matter without the second Ld. Pr.CIT in the second revisional order spells out where the error happened to second AO as an investigator or adjudicator, which exercise the Second Ld. Pr.CIT has not done, so the second Ld. Pr. CIT cannot be permitted to again ask the AO to start the investigation in the way he thinks it proper on the very same subject on which merger has taken place by virtue of the order of First Ld. Pr. CIT. And if this practice is allowed, then there will be no end to the assessment proceedings meaning no finality to assessment proceedings and that is exactly why the Parliament in its wisdom has brought in safe-guards, restrictions & conditions precedent to be satisfied strictly before assumption of revisional jurisdiction. Be that as it may be, as discussed above, we find that the Second Ld. Pr. CIT without satisfying the condition precedent u/s 263 of the Act has invoked the revisional jurisdiction (second time), so all his actions are ab initio void. 57. 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

I.T.A. No.1278/Kol/2023 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 by the assessee, the other additional grounds are left open. As discussed the impugned order of Ld Pr CIT is quashed.” 20. In view of the above discussion and consistent with the view taken by the Co-ordinate Bench of ITAT Kolkata in the case of Amritrashi Infra Private Ltd. (supra), we do not find justification on the part of the ld. Pr. CIT in setting aside the impugned assessment order which was passed by the Assessing Officer on the directions of the ld. PCIT issued u/s 263 of the Act. The impugned order of ld. PCIT is not sustainable as per law, the same is accordingly quashed.

Kolkata, the 18th March, 2024. Sd/- Sd/- [�गर�श अ�वाल /Girish Agrawal] [संजय गग� /Sanjay Garg] लेखा सद�य/Accountant Member �या�यक सद�य/Judicial Member Dated: 18.03.2024. RS

I.T.A. No.1278/Kol/2023 Assessment Year : 2012-13 Ranisati Hosiery (P) Ltd

Copy of the order forwarded to: 1. Ranisati Hosiery (P) Ltd 2. PCIT-4, Kolkata 3.CIT (A)- 4. CIT- , 5. CIT(DR),

//True copy// By order Assistant Registrar, Kolkata Benches