INCOME TAX ACT, 1961

Section 263

Revision under section 263 - Erroneous and pre-judicial order - AO satisfied with genuineness of investment in share capital of assessee company -

Assessee had challenged revisionary order passed under section 263. According to assessee, AO was fully satisfied with sources of source while examining disputed creditworthiness of shareholder of companies where as the Pr. CIT had held that AO should have enlarged enquiry and due to lack of enquiry and insufficient enquiry on part of AO, assessment order was held to be erroneous and prejudicial to interest of revenue. Held: Assessee had received share application money from three share subscribers and so notices were sent to all subscribers and therefore, observation of Pr. CIT that AO had issued notices under section 133(6) on test check basis was factually incorrect. From bank statement of subscribers companies, it was revealed that there was no cash deposit in this accounts and there was sufficient balance available to make investment in share capital of assessee company. Further, documentary evidences such as bank statement, audited statement of account, balance sheet, profit and loss account, clearly established that tangible net worth of disputed companies was more than sufficient and was much more than amount invested in shares of assessee company. Accordingly AO, did not make addition under section 68. Pr.CIT was therefore, factually incorrect in making observation that assessment order was erroneous.

Followed:Dawjee Dadabhoy & Co. v. SP. Jain & Anr. (1957) 31 ITR 872 (Cal) : 1957 TaxPub(DT) 61 (Cal-HC),

REFERRED :

FAVOUR : in assessee's favour

A.Y. : 2013-14

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