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आयकर आयकर आयकर अपीलीय आयकर अपीलीय अपीलीय अिधकरण अपीलीय अिधकरण अिधकरण, अिधकरण " ए” खंडपीठ खंडपीठ खंडपीठ मुंबई खंडपीठ मुंबई मुंबई मुंबई INCOME TAX APPELLATE TRIBUNAL,MUMBAI-“A”,BENCH सव"ी राजे"",लेखा सद"य एवं एवं एवं अिमत शु"ल,"याियक सद"य एवं Before S/Sh. Rajendra,Accountant Member & Amit Shukla,Judicial Member आयकर अपील आयकर अपील संसंसंसं/.ITA No.1697/Mum/2015,िनधा"रण िनधा"रण वष" वष"/Assessment Year-2010-11 आयकर आयकर अपील अपील िनधा"रण िनधा"रण वष" वष" Adriel Venture P. Ltd., ITO 4(1)(3) 401-A,PearlArcade,Opp. P K Jewellers, Vs Mumbai Daud Baug Lane, Off J P Road, Andheri (W),Mumbai-58 PAN: AAICA1017G (अपीलाथ" /Assessee) (""यथ" / Respondent) िनधा"रती िनधा"रती िनधा"रती ओर िनधा"रती ओर ओर सेसेसेसे/Assessee by ओर : Shri R Murlidhar राज"व क" ओर से/ Revenue by : Shri E Sankaran सुनवाई सुनवाई सुनवाई क" सुनवाई क" क" तारीख क" तारीख तारीख / Date of Hearing :21.10.2015 तारीख घोषणा क" तारीख / Date of Pronouncement :28.10.2015 आयकर आयकर आयकर अिधिनयम आयकर अिधिनयम अिधिनयम,1961 अिधिनयम 1961 क" धारा क" धारा क" धारा 254 क" धारा 254(1)के अ"तग"त आदेश के अ"तग"त आदेश के अ"तग"त आदेश के अ"तग"त आदेश 1961 1961 254 254 Order u/s.254(1)of the Income-tax Act,1961(Act) लेखा सद"य राजे"" के अनुसार लेखा सद"य राजे"" के अनुसार PER RAJENDRA, AM- लेखा सद"य राजे"" के अनुसार लेखा सद"य राजे"" के अनुसार Challenging the order,dated 27.02.2015,of thePCIT-4,Mumbai,passed u/s.263 of the Act,the assessee has filed the present appeal. 2.Assessee company,engaged in the business of share trading,filed its return of income on 19.09.2010.Initially, the return of income was processed u/s. 143(1)of the Act.Later on,the case was selected for scrutiny and was assessment was completed u/s.143(3) of the Act on 03.01.201,by the Assessing Officer(AO),determining the income of the assessee at Rs. Nil. 3.While going through the case records and the order passed by the AO,the PCIT observed that the AO had passed a routine order without application of mind, that order was completed in a mechanical fashion,that the assessee had allotted 2,00,000 shares of face value for Rs.10/- per share at a huge premium of Rs.490/-per share,that purchase of Rs.1O crores had been shown as closing stock,that there was nothing on record to reflect the reason for such huge premium,genuineness about the source of money,mode of transaction for share applica- tion money.The PCIT,vide notice dtd.16.04.2014,issued u/s.263 of the Act,asked the assessee to explain as to why the income should not be re-computed for the year under consideration. The assessee,vide its letter,dated 12.05.2014,made submissions before the PCIT. After considering the same she held that the AO had neither conducted any enquiry nor had carried out any investigation with respect to genuineness or credit worthiness of the persons from whom the trading stock was purchased,that the computation of capital gain was not enquired by the AO, that this was the first year of incorporation of the assessee company,that the AO had not at any point applied his mind to the reason for such high valuation of a Rs.10/- share at the premium of Rs.490/-,that the AO had not issued notices u/s. 133(6) of the Act to the Kolkata Companies, that the AO had failed to carryout relevant and meaningful enquiries in respect of computation of capital gain and indexation benefit of market rate,that just acceptance of receipt of paper confirmation,without any independent enquiry amounted to non-application of mind.Finally,she held that the AO had failed to enquire the receipt of huge share premium and closing stock.Accordingly,the order passed by the AO was set aside and the matter was restored back to his file to apply his mind and to investigate the issue.
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Before us,the Authorised Representative(AR)stated that the assessee had filed necessary details before the AO,that while passing the rectification order the PCIT did not consider the letter of the assessee dated 29.09.2012 addressed to the AO,that the return was selected for scrutiny through approval of CCIT,that AO had issued notices u/s. 143(2) and 142(1) of the Act,that vide its three letters the assessee had filed details of audited accounts for the year, party wise details of the purchases debited to the P & L account as well as the details of share capital and security premium received during the year,that the issue of shares at premium and purchase of trading stock was deliberated upon by the AO,that the AO had completed the assessment after discussion and verification,that it could not be construed that the assessment made by the AO was erroneous and prejudicial to the interest of the revenue, that the AO had taken a view which was possible as per the provisions of the Act,that provisions of section 263 were wrongly invoked.The AR produced before us,a copy of the assessment order that contained the office note of the AO,order dated 03.01.2013.It was stated that assessee had inspected the file and had obtained the Xerox copy of the said order.The Departmental Representative (DR) supported the order of the PCIT. 5.We have heard the rival submissions and perused the material before us.We find that originally the return was processed u/s.143(1) of the Act,that after the approval of the CCIT notices u/s.142(1) and 143(2)were issued to the assessee,that the assessee was specifically asked about the share premium charged,that assessee had filed evidences in its support,that it also produced necessary details about the closing stock.We would like to reproduce a part of the office note of the-then-AO and the same reads as under:- “The case was selected for scrutiny under CCIT’s approval, the reason being that this was the first return of the company and the company had received Rs.98,00,000/- as premium on shares issued and the assessee had shown purchases of Rs.1 crore and the entire purchase of Rs.1 crore have been shown as closing stock. All these facts need verification. The details furnished have been verified and the assessment completed accordingly” It is said that the section 263 of the Act enables the CIT to exercise the power of revision for correcting orders passed by the AO when the two cumulative conditions are satisfied. Firstly, the order should be erroneous and secondly,the order should also be prejudicial to the interests of the Revenue.The object behind the section is to correct an order passed by the AO which is erroneous and prejudicial to the interests of the Revenue,as the Department has no remedy of appeal against the assessment order.Whether a revisional order fulfils the requirements of section 263 of the Act depends upon the facts of each case.Whether there was application of mind before allowing the claim made by the assessee,has to be seen.If there is an inquiry,even inadequate that would not by itself give occasion to the CIT to pass orders u/s.263 merely because he has a different opinion in the matter.It is only in cases of lack of inquiry that such a course of action would be open. 5.1.Here,we would like to discuss two judgments that deal with the revisionary powers of the CIT.In the matter of Deepak Real Estate Developers(I.)P.Ltd.(367ITR377),the Hon’ble Rajasthan High Court found that in response to a notice under section 143(2) it produced the requisite information and details with supporting vouchers of expenditure, as disclosed in the profit and loss account besides the books of account, which were duly examined,that the AO,on a scrutiny of documents accepted the return and passed the order of assessment,that subsequently the CIT acting under section 263 set aside the order and directed the AO to verify certain documents,that the Tribunal cancelled the order.Dismissing the appeal,filed by the Department,the Hon’ble Court held that a perusal of the assessment order would testify that the AO had consciously examined all relevant records in accepting the return submitted
3 ITA/ 1697/Mum/2015-Adriel by the assessee,that the text of the decision of the CIT authenticated that the assessee had furnished to him all relevant records and documents in support of its return accepted by the AO,that the CIT did neither reject the documents or records to be irrelevant, nor lacking in their probative worth,that he simply remanded the matter to the AO,that the order of revision was not valid. In the matter of J.L.Morrison(India)Ltd.(366ITR593),the Hon’ble Calcutta High Court has dealt the issue from a different anlge.It has held that the presumption in law laid down in section 114(e)of the Evidence Act,1872,is“that judicial and official acts have been regularly performed.” Considering the fact-that all requisite papers were summoned and the matter was heard from time to time,that the view taken by the AO was not shown by the Revenue to be erroneous-the Court held that a prima facie evidence,on the basis of the presumption,would convert into a conclusive proof of the fact that the order was passed by the AO after due application of mind. 5.2.If the facts of the case are tested on the above principles,it becomes clear that the order of the AO is not unsustainable or wrong or incorrect or deviating from law therefore it is not erroneous.The AO did conduct investigation and has given a categorical finding of fact that details called for by him were filed before him and they were scrutinised by him. It was not a case of “no investigation”.It was also not a case where per se further investigation was required.In reply to the notice issued by the AO,the assessee filed details on three different occasions.The AO had called for the MOA also from it to understand the basic nature of the business carried out by the assessee. In the matter of Spectra Shares and Scrips Pvt. Ltd.(354ITR35)the Hon’ble AP High Court has held that while the AO is not called upon to write an elaborate judgment giving detailed reasons in respect of each and every disallowance or deduction, it is incumbent upon the CIT not to exercise his suo motu revisional powers unless supported by adequate reasons for doing so,that if a query was raised during the course of the scrutiny by the AO,which was answered to the satisfaction of the AO,but neither the query nor the answer was reflected in the assessment order,this would not by itself lead to the conclusion that the order of the AO called for interference and revision.Courts are of the view that there is difference between incomplete or inadequate verification and no verification whatsoever by the AO.In the present case there was complete inquiry by the AO and same is evident from the office note of the AO.Therefore,in our opinin,the juri ictional pre-conditions stipulated in section 263 of the Act were not missing and hence the order of the CIT cannot be endorsed. As a result,appeal filed by the assessee stands allowed. फलतः िनधा"रती "ारा दािखल क" गई अपील मंजूर क" जाती है. Order pronounced in the open court on 28th October,2015. आदेश क" घोषणा खुले #यायालय म% &दनांक 28th अ'टूबर,2015 को क" गई । (अिमत शु"ल/Amit Shukla) (राजे"" / RAJENDRA) "याियक सद"य / JUDICIAL MEMBER लेखा लेखा सद"य सद"य / ACCOUNTANT MEMBER लेखा लेखा सद"य सद"य मुंबई/Mumbai,"दनांक/Date: 28.10.2015 व.िन.स.Jv.Sr.PS.
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आदेश क" क" "ितिलिप "ितिलिप अ"ेिषत अ"ेिषत/Copy of the Order forwarded to : आदेश आदेश आदेश क" क" "ितिलिप "ितिलिप अ"ेिषत अ"ेिषत 1.Appellant /अपीलाथ"
Respondent /""यथ" 3.The concerned CIT(A)/संब" अपीलीय आयकर आयु", 4.The concerned CIT /संब" आयकर आयु" 5.DR “A” Bench, ITAT, Mumbai /िवभागीय "ितिनिध, ए खंडपीठ,आ.अ."याया.मुंबई 6.Guard File/गाड" फाईल स"यािपत "ित //// आदेशानुसार/ BY ORDER, उप/सहायक पंजीकार Dy./Asst.