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 during the assessment proceedings. Entire details of each shareholder i.e., balance sheet, income declared, transactions done with the assessee-company as also his creditworthiness/financial capacity was duly verified by the AO. The CIT did not doubt the ownership of the respective shareholdings by the three shareholders.

Thus, the level of the proof required in a normal case of cash credit under s. 68 could not have been applied though the AO did whatever he was supposed in the law to satisfy the requirement of s. 68. There was no evidence, information or anything else indicating that more enquiries were warranted. It was not the case of the CIT that there was a complete/total lack of inquiry. Law is well settled that the assessment order cannot be held to be erroneous simply on the allegation of inadequate enquiry. Reason for selection of the case for scrutiny does not speak of s. 56(2)(viib). Therefore, the AO could not have made enquiries on this aspect. Even otherwise, the assessee also submitted a report of the expert under r. 11UA which fully justified charging premium @ Rs. 50 per share. Hence, the AO was justified in not applying s. 56(2)(viib). Moreover, once all the details were made available before the CIT, he should have decided the issues instead of setting aside to the AO. Therefore, the order passed by the Principal CIT under s. 263 is quashed.