No revision by CIT if AO had taken a possible view

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.

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