Venkatesh Technokraft Pvt. Ltd. Vs ITO (ITAT Chandigarh)
Conclusion: CIT was not justified in exercising his powers under section 263 and considering the assessment order passed by AO as erroneous and prejudicial to the interest of the Revenue as AO after appreciating the complete documentary evidences placed on record and applying his mind to the facts of the case, accepted the evidences filed by assessee and had taken a possible view.
Held: CIT exercised his revisionary power under section 263 and considered the assessment order passed by AO as erroneous and prejudicial to the interest of the Revenue for the reasons that proper and sufficient enquiry had not been made by AO and that the Directors of the investor companies were not produced, so the genuineness of the transaction was not established. CIT also observed that only a superficial look at the documents submitted by assessee had been made and contention of assessee had been accepted by the AO without any in depth examination and such lapse had rendered the assessment order erroneous in so far as it was prejudicial to the interest of the Revenue. It was noted that in the case of Rajmandir Estates Private Ltd. Vs. Principal Commissioner of Income Tax [2016] 386 ITR 1 62(Cal), the Promoter / Director of the said assessee and their close relatives and Friends had united with the main objective of creating company apparently having the large capital basis but infact those were mere paper company having no real worth and that the share were offered which were subscribed by closely held companies owned by the Promoter / Director or their close relatives and Friends. But in the present case, the facts were different as the investor companies were not related or owned by the Director of assessee company and the shares were allotted at a premium of Rs. 15/- per share, valuation of which was worked out on the basis of detailed calculation sheet. As regards to the allegation that assessee could not produce Director of the Investor companies, it was noticed that assessee furnished confirmatory letters received from the Investing companies alongwith copies of the Balance Sheets, copies of Ledger Accounts of the broker etc and requested to CIT to issue commission as per provisions of Section 131 (1)(d), since all the Directors of Investing Companies were permanently based in Kolkata which was nearly 1700 Km away from Ludhiana and therefore, assessee requested to AO to issue the commission. However, AO after appreciating the complete documentary evidences placed on record and applying his mind to the facts of the case, accepted the evidences filed by assessee and had taken a possible view. Therefore, CIT was not justified in exercising his powers under section 263 and considering the assessment order passed by AO as erroneous and prejudicial to the interest of the Revenue.
FULL TEXT OF THE ORDER OF ITAT CHANDIGARH
This is an appeal by the Assessee against the order dt. 27/09/2018 of Ld. Pr. CIT-i, Ludhiana.
2. Following grounds have been raised in this appeal:
1. That the Ld. Commissioner of Income Tax has wrongly assumed jurisdiction under section 263 of the Act to set-aside the assessment order dated 27.12.2016 passed by the Assessing Officer in as much as the order is neither erroneous nor prejudicial to the interest of Revenue and as such the assumption of jurisdiction under section 263 of the Act is beyond his competence.
2. That the Ld. Commissioner of Income Tax has erred in failing to consider the various replies and submissions placed on record in proceedings before him which is arbitrary and unjustified.
3. That the assessment order having been passed by the Assessing Officer after due application of mind and taking into consideration the various replies, material on record and books of account, the action resorted to by the Commissioner of Income Tax is unwarranted and uncalled for.
4. That the order of Commissioner of Income Tax is erroneous, arbitrary, opposed to the facts of the case and is unsustainable in law.
From the aforesaid grounds it is gathered that only grievance of the assessee relates to the jurisdiction of the Ld. Pr. CIT assumed under section 263 of the Income Tax Act, 1961 (hereinafter referred to as ‘Act’).
3. Facts of the case in brief are that the assessee filed its return of income on 04/09/2014 declaring an income of Rs. 19,52,040/- which was processed under section 143(1) of the Act, later on the case was selected for scrutiny. The A.O. assessed the income which was returned by the assessee by observing in para 2 & 3 of the assessment order dt. 27/12/2016 as under:
2. In response to said notices Sh.Ravinder Singh Khera, Chartered Accountant, Authorised representative of the assessee, attended the assessment proceedings from time to time with whom the case was discussed. During the course of assessment proceedings, audit report along with trading Account/ Profit & Loss account, Balance Sheet etc was filed. The information requisitioned as per questionnaire was furnished, placed on record and examined. Books of account were produced. The assessee derives income from Business of wholesale trading of cutting tools.
3. The details filed were duly examined and the case was discussed with the authorized representative of the assessee. After examination, the case is assessed at returned income Rs. 19, 52,040/-.
4. The Ld. Pr. CIT thereafter exercised his revisionary power under section 263 of the Act and observed that proper and sufficient enquiries had not been made by the A.O. which rendered the assessment order erroneous in so far as it is prejudicial to the interest of the Revenue. Ld. Pr. CIT observed as under:
