ANUU AGROTECH ( P) LTD. v. PCIT- UDAIPUR

Case snapshot

Sections / provisions: 263

Questions before the Court / Tribunal

• ANNU AGROTECH (P) LTD. vs. PRINCIPAL COMMISSIONER OF INCOME TAX- UDAIPUR ITAT, JAIPUR ‘B’ BENCH Member(s) Sandeep Gosain, J.M. & Vikram Singh Yadav, A.M. ITA No. 9/Jp/2021; Asst. yr. 2016-17 Date of decision 15th September, 2021 The assessee received funds during the previous year in the form of share premium. The case of the assessee was selected for scrutiny under limited scrutiny for enquiry as to whether such receipts was from disclosed sources or not. The assessee submitted books of account including cash book, ledger, subsidiary records and various other details as required. The same was duly examined by the AO, who sought clarifications on all the relevant aspects to the extent he was supposed looking to the nature of the issue involved, as also looking at the past accepted history of the case, the evidences and material already available together with the material provided…
• Which factual, statutory and procedural conditions controlled the requested relief?
• How did the forum apply the governing provisions to the evidence and procedural history recorded in this case?

Material facts and procedural background

vk;dj vihy la-@ITA No. 09/JP/2021 Assessment Year: 2016-17 Annu Agrotech Private Limited, S-47/48, S-47/48, Commercial Shops, IPIA 324005, Rajasthan, India. cuke Vs. Pr.CIT, Udaipur.

fu/kZkfjrh dh vksj ls@ Assessee by : Shri Mahendra Gargieya(Adv.) & Shri Devang Gargieya (ITP) jktLo dh vksj ls@ Revenue by : Shri B.K. Gupta (Pr.CIT-DR)

PER: SANDEEP GOSAIN, J.M. The present appeal has been filed by the assessee a gainst the order of the ld. Pr.CIT, Udaipur dated 11/02/2021 p assed U/s 263 of the Income Tax Act, 1961 (in short, the Act) for the A. Y. 2016-17. The assessee has raised following grounds of appeal: “1. The Ld. Pr. CIT, seriously erred in law as well as on the facts of the case in invoking the provisions of Sec. 263 of the Act and therefore, the impugned order dated 11.02.2021 u/s 263 of the Act kindly be quashed. 2. The ld. Pr. CIT seriously erred in law as well as on the facts of the case in assuming jurisdiction u/s 263 of the Act without

recording a specific and categorical finding that the subjected assessment order passed u/s 143(3) dated 16.11.2018 is erroneous and prejudicial to the interest of the revenue, in absence of which the entire proceedings u/s 263 is vitiated. Therefore, the impugned order dated 11.02.2021 u/s 263 of the Act kindly be quashed. 3. The ld. Pr. CIT seriously erred in law as well as on the facts of the case in assuming jurisdiction u/s 263 of the Act by wrongly and incorrectly holding that the subjected assessment order u/s 143(3) dated 16.11.2018, was passed without making proper enquiries or verification w.r.t.: (a) Allotment of 1,80,000 shares of Face Value @ Rs.

10/- with premium @ Rs. 50/- per share for total consideration of Rs. 1.08 Crore u/s 68 proviso and, (b) Receipt of large share premium u/s 56(2)(vii) and any other relevant section of the Act. with a direction to the AO to properly examine the identity (typed as entities) 85 creditworthiness of the shareholders/investors and also genuineness of the transactions and also to examine applicability of S. 56(2)(viib) of large share premium and any other relevant section of the Act and also to make necessary additions to the total income or u/s 115JB(1) of the Act, wherever required. The assumption of jurisdiction -u/s 263 and the directions so given there under, being contrary to the provisions of law and facts on record hence, the proceedings initiated u/s 263 of the Act and the impugned order dated 11.02.2021 deserves to be quashed.

Appellant / petitioner / assessee submissions

2.2 During the assessment proceedings, the assessee company was asked by the AO vide his notice u/s 142(1) dated 25.06.2018 to explain with supporting documents that whether the funds received in the form of share premium are from disclosed sources and have been correctly offered to tax. In response, the assessee company submitted vide reply dated 08.08.2018 that the assessee company had issued shares at premium of Rs. 50/-. However, the assessee company submitted only bank account number and name of the bank to the AO. 2.3 Further, the assessee company was asked by the AO vide notice u/s 142(1) of the I.T. Act dated 09.09.2018 to prove the genuineness and creditworthiness regarding receipt of share capital and share premium.

The assessee company submitted confirmation of share transaction account on 22.10.2018. The assesse company had also submitted acknowledgement of ITR showing income of Rs. 10,72,700/-, Rs. 5,23,430/- and Rs. 5,26,550/- in the cases of Smt. Chelna Devi Jain, Sh. Manohar Lal Shah and Sh. Dharm Chand Jain and whereas they had made the investment of Rs. 30,08,500/-, Rs. 17,34,000/- and Rs. 52,57,500/- respectively. But the assessee company had neither submitted its own bank account nor the bank accounts of the persons who had made investment in shares. Again, the assessee company had also not submitted capital account of the investors. Again, none of the investors produced the bank statements to establish the source of funds for making such a huge investment in the shares, even though they were declaring a meager income in the returns.

enquiry. Kindly refer CIT vs. Sunbeam Auto Ltd. (2011) 332 ITR 167 (Del) (DPB 10-20) , wherein Delhi High Court was considering the aspe ct, when there is no proper or full verification, and it was held that: “One has to see from the record as to whether there was application of mind before allowing the expenditure in question as revenue expenditure. Learned counsel for the assessee is right in his submission that one has to keep in mind the distinction between “lack of inqui ry” and “inadequate inquiry”. If there was any inquiry, even inadequate that would not by itself give occasion to the CIT to pass orders under section 263 of the Act, merely because he has a different opinion in the matter.

13. We also observed from perusal of the record tha t the creditworthiness of the shareholders also stands fu lly established inasmuch as the direct source of the amounts given was the income declared year to year by the respective shareholder s in their return of income (accumulated savings) and loan taken from ou tsider but finally deposited in the respective bank accounts by the sh areholders. The assessee not only submitted their PAN no. but also provided copies of acknowledgement of filing return of income which co ntains the computation of total income. The AO directly inquir ed deeper into the assessment record of the concerned shareholder on t he portal of income tax department with reference to the respective PAN no. given by the assessee. Needless to say that the entire informati on of that particular shareholder being the Balance Sheet, details of inc ome declared, subjected transactions done with the assesse company in the current year as also his creditworthiness/ financial capacity wa s duly verified by the AO. Oral explanation were also made during the pers onal hearing. The Ld

Revenue / respondent submissions

The judgment does not separately label the respondent’s submissions in an independently extractable passage. No contention is inferred; read the full record.

Court / Tribunal analysis and reasoning

therefore, lacks valid jurisdiction u/s 263 of the Act and hence, the same kindly be quashed. 5. The ld. Pr. CIT seriously erred in law as well as on the facts of the case in assuming jurisdiction u/s 263 of the Act by wrongly and incorrectly invoking Explanation 2 to S. 263 as if the same conferred unbridled power upon the CIT even though the facts and circumstances of the case did not justify the application of the said Explanation. 6. Alternatively and without prejudice to the above The ld. Pr. CIT erred in law as well on the facts of the case in holding that the consideration received by the appellant company on issue of shares was in excess of the Fair Market Value by Rs.

genuineness of transactions and due to which the assessment order u/s 143(3) of the I.T. Act is found to be erroneous in so far as it is prejudicial to the interest of revenue. However, In view of the facts and submission offered by the assessee, this issue requires thorough verification. Therefore, the AO is directed to conduct necessary verification in respect of this issue by calling for relevant details and documents from the assessee, examining the books of account and audited balance sheet of the assessee, conduct independent enquiries from the persons who have contributed to share capital / share premium and based on such verification on this issue and in case of any discrepancy, appropriate action may be taken as per law.

7. Here, it is useful to refer to the Explanation-2 below section 263(1) inserted w.e.f. 01.06.2015 by Finance Act, 2015, which provides that: x x x x 8. The assessment order u/s 143(3) of the I.T. Act for the A.Y. 2016-17 dated 16.11.2018 was passed by the AO in this case, without making proper enquiries or doing any verification of the issue of Large share premium received by the assessee company during the year and the applicability of Section 56(2)(viib) andany other relevant section as discussed in preceding paras, despite being the fact that this was the sole reason for scrutiny selection. Hence, assessment order u/s 143(3) of the I.T. Act for the A.Y. 2016-17 dated 16.11.2018 has thus been rendered erroneous and prejudicial to interest of revenue on the issue of non-verification Large share premium received by the assessee company during the year and the applicability of 56(2)(viib) and any other relevant section of the Income Tax Act. The same is therefore set-aside / cancelled and restored back to the file of AO on this issue, in view of the detailed discussion made in preceding paras, with the direction to pass fresh assessment order after conducting proper verification and enquiries on the above issue and based on outcome of such enquiries, necessary addition wherever required may be made to the total

1.2 Also kindly refer CIT v/s Max India Ltd. (2007) 295 ITR 282 (SC) wherein it is held that:

“Once the existence of the creditors is proved and such persons own the credits which are found in the books of the appellant, the appellant’s onus stand discharged and the latter is not further requ ired to prove the sources from which the creditors could have acquire d the money deposited with him and, therefore the addition u/s 68 cannot be sustained in the absence of anything to establish t hat the sources of the creditors deposits flew from the appellant itself.”

Therefore, the allegation and the expectation of th e Ld. CIT from the AO acting as quasi-judicial authority, examine the rec eipts in context with the S. 68 and requiring he assesse to prove the credit to the hilt, is clearly beyond the scope of S. 263, in as much as he was su pposed, only to the extent of examination of the fact that the amount so received towards the share premium was not from undisclosed sources (if one strictly go by the reason of selection for limited scrutiny) or to exa mine the conditions as per RHC decisions. Thus, when AO has acted according to the judicial g uideline and the principles propounded by the Hon’ble Rajasthan High Court the AO could not venture to follow the binding decisions.

Operative decision and relief

expenditure which was not allowable under s. 14A—CI T held that non-consideration of disallowable expenditure under s. 14A was erroneous and is prejudicial to the interest of the Revenue—Not correct—CIT has held hat the enquiry conducted by t he AO was inadequate and has assumed the revisional jurisdict ion—Assessee has filed all the details before the AO and AO has accepted the contention of the assessee that no expenditure was attributable to the exempt income during the relevant assessment ye ar—Thus, while recording the said finding, the AO has taken one of the plausible views in allowing the claim of the assess ee—Therefore, CIT could not have set aside the order of assessmen t merely on the ground of inadequacy of enquiry—Order passed by the CIT was not sustainable in law hence, the Tribunal rightly set aside the impugned order of the CIT.

263 is set aside and the order of the AO is sustained.”

143(3) cannot be said to be erroneous—Therefore, order passed by the Principal CIT under s. 263 is quashed.”

reflected in the return of income filed by these companies, therefore, in any case if the Department has any doubt about the genuineness of arranging the funds by these share applicant companies, the enquiry and investigation should have been conducted in those cases as held by the Hon'ble Delhi High Court in the case of Lovely Exports (P.) Ltd. (supra) which has been confirmed by the Hon'ble Supreme Court by dismissing the special leave petition filed by the Department.” Considering the totality of facts and circumstances , facts of the present case and as well as the judicial pronouncements, we found merit in the contention of the ld. AR, therefore, we quash the o rder passed by the ld. Pr.CIT U/s 263 of the Act. 18. Once, we quash the order passed U/s 263 of the Act, then in that eventuality, the other grounds raised by the assess ee become infructuous and needs no adjudication. 19. In the result, this appeal of the assessee is a llowed. Order pronounced in the open court on 15 th September, 2021.

Ratio and legal principle

The narrow proposition associated with ANUU AGROTECH ( P) LTD. v. PCIT- UDAIPUR concerns annu agrotech (p) ltd. vs. principal commissioner of income tax- udaipur itat, jaipur ‘b’ bench member(s) sandeep gosain, j.m. & vikram singh yadav, a.m. ita no. 9/jp/2021; asst. yr. 2016-17 date of decision 15th september, 2021 the assessee received funds during the previous year in the form of share premium. the case of the assessee was selected for scrutiny under limited scrutiny for enquiry as to whether such receipts was from disclosed sources or not. the assessee submitted books of account including cash book, ledger, subsidiary records and various other details as required. the same was duly examined by the ao, who sought clarifications on all the relevant aspects to the extent he was supposed looking to the nature of the issue involved, as also looking at the past accepted history of the case, the evidences and material already available together with the material provided… The proposition cannot be separated from the judgment’s facts, the governing statutory version, the forum’s jurisdiction, and the exact relief recorded in ITA No. 09/JP/2021.

For working-paper purposes, the decision should be cited only after matching the material facts and reading the passages under the judgment-grounded record above. The editorial outcome label “Quashed / set aside” is a navigation aid; it does not replace the operative order or explain every issue in a multi-issue case.

Why this judgment matters

This decision is relevant when a file raises the same central question identified in the source headnote: ANNU AGROTECH (P) LTD. vs. PRINCIPAL COMMISSIONER OF INCOME TAX- UDAIPUR ITAT, JAIPUR ‘B’ BENCH Member(s) Sandeep Gosain, J.M. & Vikram Singh Yadav, A.M. ITA No. 9/Jp/2021; Asst. yr. 2016-17 Date of decision 15th September, 2021 The assessee received funds during the previous year in the form of share premium. The case of the assessee was selected for scrutiny under limited scrutiny for enquiry as to whether such receipts was from disclosed sources or not. The assessee submitted books of account including cash book, ledger, subsidiary records and various other details as required. The same was duly examined by the AO, who sought clarifications on all the relevant aspects to the extent he was supposed looking to the nature of the issue involved, as also looking at the past accepted history of the case, the evidences and material already available together with the material provided… Its practical value lies in the way the Itat , Jaipur ' B ' Bench connected the governing provisions—263—to the procedural posture and evidence before it.

The authority level is Court / Tribunal. That affects persuasive or binding weight, but authority level alone is never enough. Territorial jurisdiction, statutory period, the identity of the challenged order, and later appellate treatment must all be checked before the case is used in advice, a submission, or litigation strategy.

Practitioner action points

• Begin with the complete judgment and mark the paragraphs supporting the exact proposition relied upon.
• Match the statutory version of 263 and the decision date 2021-09-15; do not assume the current text is identical.
• Compare the notice, assessment, appeal or other procedural sequence with the chronology recorded in this case.
• Verify the stated later-history status and any review, appeal, SLP, curative or rectification proceedings before citation.
• Record why the client’s evidence is materially similar, and also record any fact capable of distinguishing the result.

Does this case match your facts?

Detailed reliance and distinction analysis

Identity check. Confirm that the cited cause title is ANUU AGROTECH ( P) LTD. v. PCIT- UDAIPUR, the proceeding is ITA No. 09/JP/2021, and the decision is dated 2021-09-15. These fields are taken from the judgment record and should appear exactly in the citation note.

Bench check. The judgment identifies the coram as SHRI SANDEEP GOSAIN, JM & SHRI VIKRAM SINGH YADAV, AM. A later order by another bench, a larger bench, or a higher forum may alter the weight or interpretation of the proposition.

Provision check. The source associates the dispute with 263. The practitioner should place the historical statutory text next to the current text and identify every amendment, proviso, explanation, rule or notification that could change the analysis.

Fact check. The source issue is not a free-standing abstract rule. It arises from the concrete record summarized above. A reliable application note should list the common facts, the different facts, and whether each difference affects jurisdiction, admissibility, limitation, burden, computation or relief.

Remedy check. The recorded result is Quashed / set aside. Where a matter is remanded, set aside, partly allowed, or disposed with directions, the exact operative language is more important than a binary winner/loser label.

History check. The current closure state is REVIEW_APPEAL_SLP_CHECK_PENDING. If that state is pending, the page does not assert that no later case exists. It means the check remains open and must be completed at the point of professional reliance.

Section / provision impact

• 263 — apply the exact version considered in the judgment.

Case network

• Haris Marine Products v. Export Credit Guarantee Corporation (ECGC) Limited — Supreme Court of India · Quashed / set aside
• Mohit Bansal v. The Institute of Chartered Accountants of India — Delhi High Court · Quashed / set aside
• The Sirpur Paper Mills Limited & Another v. Union of India & Two others — Telangana High Court · Quashed / set aside
• Income Tax Officer v. V.Mohan — Supreme Court of India · Quashed / set aside

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