Amritrashi Infra Pvt Ltd Vs PCIT (ITAT Kolkata)
Second revision u/s 263 quashed by ITAT holding not permissible on the same subject matter on which specific direction given by First PCIT have been complied by AO. Doctrine of merger applied.
Aggrieved by the aforesaid action of the Second Ld Pr. CIT, Kol-4, now the assessee is before us. The question before us is twofold. Firstly, whether the second Ld. Pr. CIT satisfied the statutory condition-precedent as prescribed in section 263 of the Act before invoking the Revisionary Jurisdiction. Secondly, whether the Second Ld Pr. CIT can again interfere in the re-assessment order framed by the AO which was pursuant to the first revisional order passed by the First Ld. Pr. CIT u/s. 263 of the Act, when the subject matter was the same and the re-assessment order of the second AO has merged with the First Revisional order of First Ld. Pr. CIT.
So the question is whether there is any merit on the finding of the Second Ld. Pr. CIT that the second assessment order/re-assessment order dated 7-12-2016 can be termed as erroneous for lack of enquiry. On a conjoint reading of the second SCN and operative portion of the impugned order, it can be safely deduced that according to Second Ld. Pr.CIT, the AO in the second round has not enquired about the share capital & premium collected by the assessee. For that we need to carefully examine as to whether the second AO has carried out his dual role as an investigator as well as an adjudicator while deciding the issue of share capital and premium collected by the assessee for AY 2012-13. Before we examine about the investigative role of the AO, we need to examine the law as it stood in AY 2012-13 and is applicable in this case.
So we note that in this assessment year before us i.e. AY 2012-13, the law in force was that if any sum is found credited in the books of an assessee in a financial year and, if the AO asks for the explanation of assessee in respect of the nature and source thereof, then the assessee is duty bound to explain the nature and source of the credit entry in the books and if the assessee fails to explain or if the AO s not satisfied, he may charge to income tax the sum so credited. So, the assessee is bound to explain before the AO the nature and source of share capital, i.e. the identity, creditworthiness and genuineness of the share capital. In this AY, the assessee is bound to know about the share applicants who wish to invest their identity, whether they have the financial capacity (creditworthiness) and they are genuine investors in their company (assessee). In this AY, the assessee is not bound by law at the time of collection of share capital to ask the share-applicants from where it is getting the money to invest in the assessee’s company. And we also note that share premium can be taxed if it exceeds the fair market value only from next AY i.e. AY 2013-14 and not in this A.Y.n other words, in the impugned order the second Ld. Pr. CIT has not found fault with the action of the second AO in giving effect to the specific directions given by him while passing the first revisional order on 23.08.2016. Thus, we note that when the second AO while framing the reassessment order pursuant to the specific direction of the First Ld. Pr. CIT’s order dated 23.08.2016 (first revisional order) has
complied with the specific directions of the First Ld. Pr. CIT and based on the inquiry conducted and after perusal of the documents running more than 352 pages which reveals the identity, creditworthiness and genuineness of the share capital and premium collected by the assessee from the share subscribers, the satisfaction of AO as envisaged in sec. 68 of the Act is a plausible view and the fact that the share subscribers responded to sec. 133(6) notice and produced all documents along with the audited financial statements and other documents referred supra, the assessee had discharged the onus upon it about the identity creditworthiness and genuineness of the share capital and premium collected by the assessee from the respective share subscribers. Since the aforesaid exercise was carried out by the second AO in the reassessment proceedings and the documents referred to above are in the assessment folder, the Second Ld. Pr. CIT erred in holding the reassessment order of the AO in respect of share capital and premium collected by the assessee as erroneous as well as prejudicial to the interest of the revenue. In the light of the aforesaid discussions and on perusal of the documents, we are of the view that AO’s view to accept the identity,creditworthiness and genuineness of the share capital and premium collected from the share subscribers was a plausible view and at any rate can be termed as an unsustainable view on law or factsSince the AO’s view on the facts collected and discussed is definitely a possible view, so in the factual background discussed in detail, we are of the considered opinion that Ld. second Pr. CIT ought not to have interfered with the AO’s reassessment order which in any case can be classified as ‘unsustainable in law’ since it is in line with plethora of judicial decisions of the subject.
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. 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.
FULL TEXT OF THE ITAT JUDGEMENT
This is an appeal preferred by the assessee against the order of Learned Principal Commissioner of Income-tax(hereinafter referred to Ld. Pr. CIT), Kolkatadated14-03-2019 for the Assessment Year(in short AY) 2012-13 passed under section (in short u/s) 263 of the Income-tax Act, 1961 (hereinafter referred to as the “Act”).
2. The main grievance of the assessee is against the action of the Ld. Pr. CIT invoking his second (2nd) revisional jurisdictional u/s. 263 of the Act against the action of the Assessing Officer (hereinafter referred to as ‘AO’) who framed the re-assessment order pursuant to the first revisional order dated 23.08.2016 which impugned action of Ld. Pr. CIT, according to assessee, is without satisfying the requisite conditional precedent as stipulated u/s. 263 of the Act and therefore without jurisdiction and resultantly bad in law, so it has to be quashed. [Please note that since there are two assessment orders, and two Ld. Pr. CIT’s involved in this Appeal, for better & easy understanding the case, the AO, who framed the original assessment order is called as ‘First AO’ and the re-assessment /second assessment framed AO will be called as the ‘Second AO’ and the first revisional order passed by CIT is called as ‘First Ld. Pr. CIT’ and the second incumbent, who passed the impugned order is called as ‘Second Ld. Pr. C.I.T’].
3. Brief facts of the case are that the assessee company filed its return of income on 30-03-2013 declaring an income of Rs. 1630/-. The case was selected for scrutiny u/s. 143(2) of the Act under CASS citing the reason “large share premium received” and assessment u/s. 143(3) of the Act was framed by the AO (hereinafter referred to as the First AO) in the original first assessment on 26.03.2015 making addition of total income of Rs.45,66,01,634/- under section 68 of the Act on account of alleged unexplained cash credit being share capital received [hereinafter referred to as the first assessment order]. Thereafter, the Ld. Pr.CIT-4 (hereinafter referred to as the First Ld. Pr. CIT ) issued show cause notice dated under section 263 of the Act (hereinafter referred to as the first SCN) against the order passed by the First AO in the original scrutiny assessment u/s. 143(3) of the Act dated 26.03.2015. The reason for interference cited inter-alia by the First Ld. Pr. CIT was that though the reason for selection for scrutiny was “large share premium received”, however, from a perusal of the assessment record/folder suggests that the First AO passed the original first assessment order without giving proper opportunity to the assessee and even though the assessee discharged its onus by furnishing documents, the AO with a predetermined mind has framed the high-pitched assessment and so, in order to carry out proper verification of this issue, the First Ld. Pr. CIT by order dated 23.08.2016 was pleased to set aside the original/first assessment order of the AO dated 26.03.2015 for de-novo assessment and directed the AO to specifically examine the source of share application money, identity of investors and its genuineness (hereinafter referred to as the First revisional order). The First Ld. Pr. CIT’s specific direction is given below:
4(v) ` Considering the above facts and circumstances of case, the assessment order passed on 26.03.2015 is set aside denovo with a direction to AO to carry out proper examination of books of accounts and Bank accounts of assessee as well as investors. AO is also directed to examine the source of share application, identity of investor and its genuineness.
(emphasis given by us)
4. Pursuant to the first revisional order passed by the First Ld. Pr. CIT dated 23.08.2016, in the second round of re-assessment, the AO (hereinafter referred to as Second AO) framed the reassessment order dated 07.12.2016 by making an addition/disallowance u/s. 14A of the Act of Rs.10,366/- u/s. 143(3) read with section 263 of the Act (hereinafter referred to as the second assessment/re-assessment order) by observing as under:
“Thus certain expenses incurred which need to be disallowed as per section 14A of I T Act read with Rule 8D and considering the circular no. 5/2014 dt. 11.02.2014. The disallowance in accordance with the section 14A of the I T Act read with Rule 8D is computed herein below:
A. 14A r.w.r. 8D(1):
