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Income Tax Appellate Tribunal, DELHI BENCH ‘F’, NEW DELHI
Before: Sh. K. N. CharyDr. B. R. R. Kumar
Per Dr. B. R. R. Kumar, Accountant Member:
The present appeal has been filed by the assessee against the order of the ld. PCIT-7, New Delhi dated 31.03.2021.
The pertinent facts relevant to the adjudication of the case are as under:
• The assessee filed return of income on 21.11.2014 declaring total income of Rs.1,31,88,300/-. • The case has been selected for limited scrutiny on the following basis:(PB 207) a. Large share premium during the year b. Mismatch in sale turnover
ITA No. 1007/Del/2021 2 Pigeon Exports International (P) Ltd. 3. The assessment has been completed on 15.05.2016 excepting the returned income. The operative part of the Assessment Order is of three lines which is as under:
“2. The assessee company is in the business of trading/investment in share and security and fixed deposits. The details filed in respect of various items called for have been examined and the returned income by the assessee at Rs.1,31,88,238/- is accepted.”
The ld. PCIT-7 vide order dated 23.01.2019 passed an order holding that the Assessment Order is erroneous and prejudicial to the interest of revenue as the loss incurred by the assessee out of the transaction of penny stock of Rs.45,78,440/- has been unduly allowed by the AO without examination.
The order of the ld. PCIT-7 has been remitted back by the Tribunal vide order dated 13.09.2019 to conduct proceedings denovo.
Owing to the order of the Tribunal, the proceedings have been initiated vide issue of show-cause dated 31.10.2019 which culminated into passing of an order u/s 263 of the Income Tax Act, 1961 by the ld. PCIT on 31.03.2021.
Aggrieved the assessee filed appeal before us.
Heard the arguments of both the parties and perused the material available on record.
The core issue to be adjudicated by us is whether the action of the ld. PCIT is correct or not owing to the limited scrutiny guidelines issued by the CBDT.
ITA No. 1007/Del/2021 3 Pigeon Exports International (P) Ltd. 10. The plea of the assessee before the ld. PCIT was that the case cannot be subjected to proceedings u/s 263 as the case was selected on the parameter “large share premium received during the year” whereas the issue in order u/s 263 involved allowability of the “loss on sale of shares of SRK Indus”. The ld. PCIT has duly considered the objection of the assessee and held that limited scrutiny of large share premium received during the year is directly linked to the premium received on the sale of shares of SRK Indus whose share prices are artificially lifted in the stock exchange.
We find the large share premium is on the receipt side and on capital account whereas subsequent sale and the profit or loss earned thereof is the succeeding action of the assessee/business related to the activity of sale of shares leading to earning to capital gains or loss. When, we examine the facts of the case, we find that the purchased shares @ Rs.343/- per share in September 2013 and sold the same in March 2014 @ Rs.35/- per share and incurred a loss of Rs.44.78 lacs. The scrutiny guidelines instead of “examining the loss” directed at “examination of large share premium received during the year”. As per the balance sheet, the share capital of Rs.62,07,960/- and reserves & surplus of Rs.26,09,00,897/- enhanced during the year by 6,55,000 shares valuing Rs.65,50,000/- and reserves & surplus enhanced to Rs.29,60,11,316/- i.e. by Rs.3,51,10,419/-. The increase in the reserves is on account of profit during the year of Rs.89,10,419/- and share premium of Rs.2,62,00,000/-. Hence, there was an occasion to examine the “Large share premium received during the year” of Rs.2,62,00,000/-. Thus, the limited
ITA No. 1007/Del/2021 4 Pigeon Exports International (P) Ltd. scrutiny guidelines in the instant case by themselves directed scrutiny of receipt of the premium of Rs.2,62,00,000/- dealing with capital receipt and hence the order of the ld. PCIT dealing with business loss which is against the scrutiny guidelines issued cannot be held to be legally valid.
In the result, the appeal of the assessee is allowed. Order Pronounced in the Open Court on 15/02/2022.
Sd/- Sd/- (K. N. Chary) (Dr. B. R. R. Kumar) Judicial Member Accountant Member Dated: 15/02/2022 *Subodh* Copy forwarded to: 1. Appellant 2. Respondent 3. CIT 4. CIT(Appeals) 5. DR: ITAT ASSISTANT REGISTRAR