George Mathan, J.M:— This is an appeal filed by the assessee against the order passed under section 263 by the ld. Commissioner of Income Tax, Kolkata-II, Kolkata in F. No. CIT-II/DC(Hq)-2.Kol/263/2012-13/10339-41 dated 26/28.03.2013 for the assessment year 2008-09.

2. In the assessee's appeal, assessee has raised the following grounds:—

(1) That on the facts and in the circumstances of the case the initiation of proceedings u/s 263 and the order passed there under by the ld. CIT is wrong, unjustified, bad in law and barred by limitation. The conditions precedent for initiation of action u/s 263 did not exist and were not satisfied in this case. The order so passed deserves to be cancelled in limine.

(2) That the order passed by the Assessing Officer was neither erroneous nor prejudicial to the interest of revenue within the meaning of section 263 and the ld. CIT erred in law as well as on facts in assuming jurisdiction u/s 263 and setting aside the assessment with a preconceived notion and a prejudiced mind. The order so passed is liable to be cancelled.

(3) That the ld. CIT erred in holding that receipt of share capital was not properly investigated and was not justified in imposing her own view of the manner in which enquiry was to be conducted. The directions given by the ld. CIT amount to making a roving & fishing enquiry, which is outside the scope of the provisions of section 263.

(4) That the ld. CIT erred in law in invoking the provisions of section 263 merely on the basis of the so called ‘background’ wrongly conceived by her which had no application in the facts of the appellant's case. The ld. CIT erred in misconstruing the meaning & purport of the principles decided in the Court decisions relied on by her which had no relevance in the facts of the appellant's case.

3. None represented on behalf of the assessee and Shri Ajay Kumar Singh, CIT, D.R represented on behalf of the Revenue.

4. The appeal of the assessee had been filed on 14.05.2013 The assessee had filed Stay Petition in S.P No. 73.Kol/2013 which came to be disposed of by the Tribunal vide an order dated 20.06.2014 While dismissing the assessee's Stay Petition, the Coordinate Bench of this Tribunal had posted the appeal for hearing on 27.06.2014 The Stay Petition was originally filed on 29.08.2013 The Stay Petition along with the appeal was originally fixed for hearing on 04.12.2013 The Stay Petition was posted on multiple dates, like 06.11.2013, 21.11.2013, 04.12.2013 On 04.12.2013 the appeal of the assessee was also posted for hearing on 26.12.2013 On 26.12.2013 again adjournment was sought. The Stay Petition along with the appeal was posted for hearing on 29.01.2014 Again adjourned repeatedly at the request of the assessee to 07.12.2014, 14.02.2014, 17.06.2014 and finally Stay Petition was disposed of on 20.06.2014 and in the order dismissing the Stay Petition the appeal was posted for hearing on 27.06.2014 On 27.06.2014 again the assessee's ld. Counsel sought an adjournment, on which date it was specifically noted that no further adjournment was to be given and the appeal posted to 02.07.2014 The order-sheet recording on 27.06.2014 is extracted below:—

“This appeal is a priority appeal because the order under challenge is the revision order passed by the CIT-II, Kolkata under section 263 of the Income Tax Act, 1961. The assessee has requested for stay of proceedings initiated by the AO in pursuance to direction given by the CIT under section 263 of the Act and for this, the stay petition was filed vide S.P No. 73.Kol/2013, which was rejected vide order dated 26.03.2014 fixing the appeal for hearing on out-of-turn basis for 27.06.2014 The assessee has requested for adjournment of appeal as the Counsel is going out of station and in the interest of natural justice, this appeal is adjourned to 02.07.2014 But at the time of adjournment, it was made clear to the ld. Counsel for the assessee that no further adjournment will be given on 02.07.2014 as this is a priority appeal and the assessee even asked for staying the proceedings before the AO, as noted above.

In terms of the above, the matter is adjourned to 02.07.2014 Both the parties are informed in the Open Court”.

5. On 02.07.2014, again adjournment was sought and again with the direction that no further adjournment should be granted. The appeal was adjourned to 05.08.2014 The order-sheet noting for 02.07.2014 is extracted below:—

“Today, when this appeal was called for hearing, the ld. Counsel for the assessee, Shri J.M Thard, Advocate stood up and asked for adjournment for the reason that he could not prepare the appeal as he was busy in some family affairs and he was out of station for the same. This is despite the fact that the matter was adjourned on last date with a clear direction that no further adjournment will be given but in the interest of natural justice and keeping the option of fair play open, we grant one more adjournment and for this the ld. CIT(DR) has consented. However, the ld. Counsel for the assessee is directed to give the name and address of Managing Director and Directors of the Company by 8th July, 2014. The Revenue is also directed to bring assessment records as well as the record file of revision proceedings under section 263 of the Act.

In terms of the above, the matter is adjourned to 05.08.2014 No further adjournment will be given on that date. Both the parties are informed in the Open Court”.

6. On 05.08.2014, when the case was called for hearing, again adjournment was sought vide a letter dated 04.08.2014, which was vehemently opposed by the ld. CIT, D.R However, the appeal was again adjourned to 12.08.2014 The order-sheet recording for 05.08.2014 is extracted below:—

“Again today, when this matter was called for hearing, the assessee has filed adjournment petition dated 04.08.2014, which states the reason as under:—

“The hearing of the above appeal is fixed on 05.08.2014 before the Hon'ble ‘B’ Bench of the Income Tax Appellate Tribunal, Kolkata but due to pressure of income tax return filing work in the month of July, we and our counsel could not prepare the case. Therefore, under the facts and circumstances of the case please grant us an adjournment of one month”.

At the first instance, they have filed the stay petition for staying the proceedings before the AO in consequence to revision order passed by the CIT and now they are, time and again, asked for adjournment. On earlier occasions, it was made clear that no further adjournment will be given. Now, the ld. CIT, DR, Shri Ajoy Singh has vehemently opposed granting of adjournment and stated that the assessee now wants to avoid hearing on the one pretext or the other. The ld. CIT, DR stated that the issue is now covered by the decision of the Jurisdictional High Court in the case of K.P Jain v. CIT in ITA No. 232 of 2006 dated 12.11.2010 and also by the decision in the case of Zigma Commodities Private Ltd. v. ITO in W.P No. 281 of 2014 dated 08.05.2014 He also stated that the issue is covered by the decision of the ITAT in the case of Jet Age Securities Pvt. Ltd. v. ACIT in ITA No. 637.Kol/2013 dated 18.07.14 In terms of the above, the ld. CIT, DR stated that in case the Bench is inclined to grant adjournment, very short adjournment be given.

After hearing the ld. CIT, DR and in absence of the assessee, we adjourn the matter to 12.08.2014 and make it clear in the Open Court that no further adjournment will be given to the assessee. In terms of the above, the matter is adjourned to 12.08.2014 Date is informed in the Open Court”.

Today i.e on 12.08.2014, when the matter came up for hearing, none appeared on behalf of the assessee. These facts clearly show that the assessee has no genuine interest in having its appeal disposed of. Consequently this appeal filed by the assessee is being disposed of ex-parte qua the assessee.

7. Ld. CIT, D.R submitted that the order passed under section 263 by the ld. CIT, Kolkata-II, Kolkata was valid. It was the submission that the assessee is a Company which has issued its shares of Rs. 10/- at a premium of Rs. 90/- per share to an extent of 24,55,000 shares. It was the submission that 100 rupees was including a premium. Ld. CIT, D.R placed before us the Certificate of Incorporation of the assessee-company to be of 2007-08. It was the submission that when the Company was incorporated, there were two subscribers to the shares being Shri Ganpat Jain and Shri Subodh Tody. It was the submission that the said Shri Ganpat Jain has not filed his return after the assessment year 2006-07. It was the submission that the last return filed by Shri Ganpat Jain was for the assessment year 2006-07 and there is no return after that. Regarding Shri Subodh Tody, it was the submission that there is no evidence itself of filing of return regarding the said person. It was the further submission that 263 was invoked by the ld. CIT on the ground that unaccounted money was being converted through a masquerade or a channel of investment in the share capital of Company. It was the submission that there were similar many other cases, which are pending before the Tribunal. It was the submission that the methodology adopted by the assessee is that, it filed return of income which was either not processed or processed only under section 143(1). Then the assessee filed a letter intimating the Assessing Officer of an escapement of income of some nominal amount. The Assessing Officer issued 148 notices to which the assessee responds that the return filed earlier was to be considered as the return in response to the notice under section 148. Subsequently the assessment is completed under section 143(3) read with section 148 assessing the income of the assessee along with the additional income. It was the submission that in most cases, the issuance of the shares at a premium is also recorded in the assessment order. It was thus the submission that by making a reference to the issuance of the shares at a premium in the assessment order, attempt has been made to subvert the possibility of another 148 reopening or 263. It was then the submission of the ld. CIT, D.R that in the present case, the assessee-company came into existence during the financial year 2007-08 relevant to the assessment year 2008-09 with two subscribers. Then further shares have been allotted at a premium. It was the submission that for the assessment year 2008-09, the assessee had filed its return through On-line Electronic Filing on 18.09.2008 The said return was processed under section 143(1) on 21.10.2009 Subsequently a letter was received from the assessee on 03.05.2010 intimating that no intimation has been received. On this letter, the Assessing Officer had issued notice under section 148 on 05.05.2010, wherein it has been recorded that the assessee has debited a sum of Rs. 46,840/- in its Profit & Loss A/c. and this amount was not allowable in view of the provisions of section 35D of the Act. On 10.05.2010, the assessee requested for the communication of the reasons recorded for the purpose of reopening. Interestingly the said reasons have not been provided to the assessee. On 10.05.2010, the Assessing Officer had also issued 142(1) notice to the assessee, wherein various details have been called for. It was the submission that however, in the 142(1) notice, there was no requisition by the Assessing Officer in respect of the allotment of the shares at the premium. On 17.05.2010, the assessee had appeared and had filed certain written compliances. It was the submission that in the said compliance though there was no requisition in respect of the details of the share capital received. The assessee filed certain details wherein the names and addresses and Permanent Account numbers of various companies, who had invested in the shares of the assessee-company at a premium, had been given. It was the submission that notices were issued on 19.05.2010 under section 133(6) to the share applicants who are allotted shares of 80000 and above. It was the submission that even the Vokalatnama of the persons, who had appeared before the Assessing Officer did not contain the signature of the assessee. It was the further submission that 133(6) notices which had been issued to the various share applicants were hand delivered to the assessee. The acknowledgments contained the same signature as the person who has filed the present appeal. It was the submission that though certain details have been filed in response to the 133(6) they were incomplete and the Assessing Officer had also not verified nor discussed the replies. It was the further submission that notices under section 133(6) were issued by hand and substantial numbers of notices were received by the same person on behalf of the multiple Companies. It was the submission that the person who received the notices for multiple Companies was the same person, was signed the Form 36 in the case of the assessee under the name Arihant Jain. It was the submission that nothing has been brought on record to show that Arihant Jain was a Director of the assessee-company. Even it was the further submission that the original subscribers to the shares of the assessee-company who were also the identified Directors were Ganpat Jain and Subodh Tody. It was the further submission that subsequent to the Revenue raising this objection on an earlier date in the hearing of the appeal, the assessee has filed a revised Form 36 along with the grounds of appeal signed by one Jhumar Mall Saraogi. It was the submission that this Form 36 and grounds of appeal was verified on 31.07.2014 It was the submission that along with Form 36 and grounds of appeal were verified on 31.07.2007 The assessee has filed the GRS-7 received for the Form 18 of the Companies Act for the change of address wherefrom it is noticed that the receipt was issued on 16.01.2014 and the address of the Registered Office of the assessee-company has been changed w.e.f 10.01.2014 It was thus the submission that the appeal having been originally filed on 14.05.2013 The Form 36 and the grounds of appeal filed itself were invalid. It was the submission that nothing has been produced on record to show when the said Jhumar Mall Saraogi became the Director of the assessee-company. It was the further submission that thus when the original assessment was done, no investigation had been done by the Assessing Officer in respect of the share applicants, much less an enquiry as is normal. It was the submission that further as a consequence to the order passed under section 263, the consequential assessment order had been passed on 30.03.2014, wherein notice under section 131 had been issued to the shareholders and none had appeared nor responded and consequently the share application money received by the asseessee has been treated as undisclosed cash credit in the hands of the assessee. It was the further submission that in the present case, there is no order-sheet recording as to the identity, genuineness or the existence of the share applicants. It was also the submission that whether the shares have been allotted to the share applicants have also not been shown. It was the submission that the consequential order having been passed giving effect to the order under section 263, in view of the decision of the Hon'ble Jurisdictional High Court in the case of Kailash Prasad Jain in ITA 232.Kol/2006 dated 12.11.2010, the appeal filed by the assessee against the order passed under section 263 was liable to be dismissed as infructuous. Ld. D.R also placed reliance upon the decision of the Coordinate Bench of this Tribunal in the case of Jet Age Securities Pvt. Ltd. in ITA No. 637.Kol/2013 dated 18.07.2014 for the assessment year 2008-09, wherein on account of the consequential assessment order having been passed, the appeal filed by the assessee against the order passed under section 263 has been held to be infructuous. It was also the submission that the Hon'ble jurisdictional High Court in the case of Zigma Commodities Pvt. Ltd. in W.P No. 281 of 2014 vide an order dated 08.05.2014 has held as an obiter dicta that the Commissioner had received the records prior to the issuance of the show-cause notice and opined that the Assessing Officer had failed to apply his mind objectively and failed to conduct an inquiry over the subscription of the shares to various subscribers at a high premium. Section 263 of the Act never envisages the separate recording of the satisfaction before the issuance of the show-cause notice but if it is clearly discernible from the facts narrated in the show-cause notice that the order of the Assessing Officer appears to be erroneous and a prejudice is caused to the Revenue, it would render the said show-cause notice legally valid”. It was thus the submission that the order of the ld. CIT passed under section 263 was liable to be upheld.

8. On a specific query from the Bench as to what has led to this sudden spurt in the 263 being initiated in the share application and share applicants of the various companies. It was the reply by the ld. CIT, DR in the following words:—

“Many of these companies are under investigation by the Ministry of Corporate Affairs as well as CBI, Enforcement Directorate and SIT. In case of politically exposed person, the investigations are at a critical level and therefore, the names of the entry operators cannot be divulged at this juncture”.

It was the submission that the order passed under section 263 may be upheld.

9. We have considered the submissions. De hors the fact that many of the companies are under investigation by various authorities. De hors the fact that there is substantial allegation against many of the share applicants and de hors the fact that allegations have been raised with regard to these companies, we are bound by the facts as are available on the records. The undisputed facts in the present case clearly are that the assessee is a Company which came into existence during the assessment year 2008-09. The assessee-company was incorporated on 07.05.2007 The assessee has issued shares at the premium. The assessee has filed its return of income for the relevant assessment year declaring an income of a loss of Rs. 1,840/-. The assessee has shown a profit as per 115 JB at Rs. 1,844/-. The assessee as per Memorandum & Articles of Association is in the business of real estate. The ancilliary businesses are also permitted. As per the Profit & Loss A/c., the assessee has shown purchases of unquoted shares of various other companies. The list of the companies whose shares have been purchased shows that the assessee is holding the shares of the companies from whom the assessee has received share application money. The P & L A/c. of the assessee shows no sales at all. Balance-sheet of the assessee shows no debtors but the cash and Bank balances. The cash in hand being at Rs. 5,18,633/-. It also shows TDS receivable of about Rs. 50 lakhs and share application money Rs. 84,44,684/-. This being the first year of business of the assessee, TDS receivable of Rs. 50 lakhs should itself drawn the attention of the Assessing Officer when there is no sales, no contracts, nothing whatsoever other than the investment in shares of various companies. The total expenditure as recorded in the Profit & Loss A/c. is barely Rs. 5 lakhs, then how the TDS receivable of Rs. 50 lakhs came into play. Surprisingly this has not drawn the attention of the Assessing Officer. Further facts in the present case shows that most of the debits into the assessee's Bank account is by cash cheque. Coming to the assessment order originally passed shows that in the course of original assessment, TDS certificates to the extent of Rs. 35,380/- had been produced. The return for the relevant assessment year came to be filed on 18.09.2008 On 03.05.2010, the assessee has written a letter intimating that the intimation under section 143(1) has not been received. Notice under section 148 was issued on 05.05.2010 the assessee responded that the return originally filed was to be treated as the return in response to the notice under section 148. Notice under section 142(1) was issued on 10.05.2010 and the assessment came to be completed on 07.07.2010 In short within two months and two days of the notice under section 148 being issued, the assessment is also completed. Though 133(6) notices have not been fully responded to the Assessing Officer instead of doing any verification, the assessment has been closed. This itself shows that the assessment was completed in a very hurried manner without doing any investigation in the course of assessment. A perusal of the assessment records in the present case shows that in the course of original assessment the PAN details of both the then Directors being Subodh Kumar Tody and Ganpat Jain was produced. However, no attention was drawn on the person who has not filed his return after the assessment year 2006-07, has found the source for starting a company during the assessment year 2008-09 and how a company which has got no business could sell its shares on private placement at a premium and that too to companies who do not respond to notice under section 133(6). Obviously this needed detailed investigation. A perusal of the order sheet recording in the present case as made by the Assessing Officer shows no specific investigation having been done on the share application, nor of the receipt of the replies to the 133(6) notices. However, it is also pertinent to note that the replies to the 133(6) then issued are seen to have the rubber seal of various dates of filing and are conspicuous by the fact that they are all in a separate folder and not in the assessment folder. The assessment order passed under section 143(3) on 07.07.2010 does not speak of any investigation having been done. The absence of the complete information as sought for by the Assessing Officer under section 133(6) also should have drawn the attention of the Assessing Officer in respect of the nature of the transactions. Further fact that in the subsequent proceedings giving effect to the order of the ld. CIT passed under section 263, no reply whatsoever has been received in response to the notices under section 133(6) which has been sent by post clearly shows that the order passed under section 143(3) read with section 147 by the Assessing Officer on 07.07.2010 was clearly erroneous and prejudicial to the interest of revenue and the ld. CIT, Kolkata-II, Kolkata has rightly invoked revisionary powers under section 263. This view of ours also find support from the decision of the Hon'ble Full Bench of the Guwahati High Court in the case of Jawahar Bhattacharjee reported in 341 ITR 434 (Gau.) (FB), wherein the Hon'ble Full Bench has categorically held

“not holding such enquiry as is normal and not applying mind to the relevant material in making an assessment would certainly be erroneous assessment warranting exercise of revisional jurisdiction”.

10. Further the above facts clearly show that the requisite and proper inquiries were not done in respect of the share application money received by the assessee in the course of original assessment order passed on 07.07.2010 nor has the Assessing Officer applied his mind on the facts of the case. In these circumstances, in view of the decision of the Hon'ble Supreme Court in the case of Malabar Industrial Company Limited v. CIT reported in (2000) 243 ITR 83 (SC) as also the decision of the Hon'ble Madras High Court in the case of Ashok Leyland Limited v. CIT reported in (2003) 260 ITR 599, the action of the ld. CIT in setting aside the assessment order passed under section 148/143(3) on 07.07.2010 cannot be faulted with. Consequently in the appeal filed the assessee is liable to be dismissed and we do so.

We may also mention here that originally the appeal has been filed on 14.05.2013 This appeal was signed by one Shri Arihant Jain. A defect notice had been issued intimating that the appeal is defective in so far as the appeal has not been signed by the Managing Director. This defective memo came to be replied to by letter dated 15.05.2013 The letter is signed by the said Shri Arihant Jain. Subsequently on 31.07.2014, a letter has been filed intimating a change of address by one Mr. Jhumar Mall Saraogi. This letter was filed on 04.08.2014 On 05.08.2014 ld. A.R of the assessee has filed a letter intimating that the Directors of the assessee-company are Shri Jhumar Mall Saraogi and Shri Anand Kumar Jain. There is no intimation as to when the original Directors of the assessee-company Shri Ganpat Jain and Shri Subodh Tody were replaced or when Shri Arihant Jain became a Director. There is no information to show when Shri Arihant Jain, Shri Subodh Tody and Shri Ganpat Jain were replaced by the Directors Shri Jhumar Mall Saraogi and Shri Anand Kumar Jain. Though the assessee has filed a fresh appeal memo and Form 36 dated 31.07.2014 signed by Shri Jhumar Mall Saraogi. It is not shown as to how Shri Jhumar Mall Saraogi was a Director as on 14.05.2013 when the appeal was filed by the assessee. These facts are being brought out because if Shri Arihant Jain is the Director then the appeal filed by the assessee on 14.05.2013 is within time. However, if Shri Arihant Jain was not the Director then the appeal primarily filed itself would be defective and would be liable for being dismissed. In such a situation, as Shri Jhumar Mall Saraogi has signed the Form 36 and grounds of appeal only on 31.07.2014 and if he is to be considered as the Director, then the appeal would be belated in so far as the appeal has been signed and verified only on 31.07.2014 Thus clearly even before the Tribunal the assessee is attempting evasive method and no facts are being placed. However, we are not deciding this issue as we have already on the issue of jurisdiction under section 263 upheld the order of the ld. CIT.

11. Coming to the alternative argument of the ld. D.R that the consequential assessment order having been passed, the appeal filed by the assessee has become infructuous and must be dismissed as such. We may mention here that the decision of the Coordinate Bench of this Tribunal in the case of Jet Age Securities Pvt. Ltd. referred to supra was the order passed by the same coram and that the order was passed only on the ground that the ld. AR in that case had agreed to let the appeal be dismissed as infructuous as he was sure of getting relief on merits. Coming to the decision of the Hon'ble jurisdictional High Court of Calcutta in the case of Kailash Prasad Jain, it is noticed that the Hon'ble jurisdictional High Court has categorically held that the appeal factually had become infructuous but not legally in the said case. Hon'ble jurisdictional High Court had held that considering all the aspects of the matter no decision should be rendered as if they did then the appeal preferred by the assessee against the subsequent order of the assessment will have to be heard on merit and in that case the question of jurisdiction cannot be raised. It was because of this that the Hon'ble jurisdictional High Court in that case had kept all points open since the regular appeal had already been preferred and the Hon'ble High Court had held the appeal against the 263 order to have become infructuous. Though in the present case also, the consequential orders have been passed and appeals have been filed before the appropriate authorities, still these appeals filed by the assessee against the order passed under section 263 would not become infructuous in so far as the assessee has raised the issue of jurisdiction of the Commissioner to pass an order under section 263 in these appeals. It is only on the jurisdictional issue that we have decided these appeals. We have not gone into the facts as those are in the consequential order passed by the Assessing Officer against which the appeals are pending before the appropriate authorities. Consequently this argument of the ld. CIT, D.R stands rejected. In the result, we uphold the order passed by the ld. CIT under section 263.

12. In the result, the appeal of the assessee is dismissed.

Order pronounced in the open Court on 14th August, 2014.