Rissala Decor (P) Ltd. v. Pr. CIT

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The Tax Publishers2020 TaxPub(DT) 1204 (Del-Trib) : (2020) 203 TTJ 0521

INCOME TAX ACT, 1961

Section 263 Section 68

When an assessment order was passed several months ahead of prescribed deadline without making enquiries and verifications which should have been made, it can be said that the order was passed without due application of mind, and in avoidable haste, as such, the order passed by AO was therefore, erroneous and prejudicial to the interest of revenue under section 263.

Revision under section 263 - Erroneous and prejudicial order - Lack of proper enquiry and verification - Genuineness of share capital and huge premium

Pr. CIT noted that during the course of assessment proceedings, AO was required to examine and verify the justification of share premium with regard to the FMV and the creditworthiness of the subscriber to whom the said shares have been allotted at a huge premium. But, the AO simply placed the submissions on record without verifying the ITR of subscribers from concerned AO or issued any notice 133(6) to cross verify the genuineness of transactions, and hence, the AO failed to examine the same but completed the assessment after accepting the FMV as submitted, without verification. The AO did not apply his mind to verify basic reason of selection of scrutiny case of CASS, hence, order passed by AO was erroneous and prejudicial hence, to be set aside under section 263.Held: It was not in dispute that the case was selected for scrutiny with the main reason of verification of large share premium received during the year. Moreover, it was also not in dispute that the AO had completely failed in carrying out any verification in respect of the share capital issued during the year for the purpose of ascertaining the genuineness of these cash credits within the meaning of section 68. It is well settled that it is the initial burden of the assessee to prove identity of the person, genuineness of the transaction and financial capacity of the person, as far as transactions covered by section 68. Assessment Order, dated 12-5-2016 was passed without making inquiries or verifications which should have been made for ascertaining the genuineness of the cash credits within the meaning of section 68. Tribunal also note that by virtue of Expln. 2 to section 263 with effect from 1-6-2015, an order passed, in the opinion of the Principal Commissioner or CIT, without making inquiries or verifications which should have been made, shall be deemed to be erroneous insofar as it is prejudicial to the interests of revenue. When an assessment order is passed several months ahead of prescribed deadline without making enquiries and verifications which should have been made, it can be said that the order was passed without due application of mind, and in avoidable haste. In view of the foregoing, the impugned revisionary Order, dated 5-3-2019 passed by Pr.CIT under section 263 was in accordance with law, having regard to specific facts and circumstances of the present appeal. Therefore, Tribunal declined to interfere with the aforesaid impugned reisionary Order, dated 5-3-2019 passed under section 263.

Relied:Gee Vee Enterprises v. Addl. CIT & Ors. 91975) 99 ITR 375 (Del) : 1975 TaxPub(DT0 267 (Del-HC) and Rampyari Devi Saraogi v. CIT (1973) 88 ITR 323 (SC) : 1973 TaxPub(Dt) 389 (SC).

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