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Income Tax Appellate Tribunal, DELHI BENCH: ‘F’ NEW DELHI
Before: MS SUCHITRA KAMBLE & DR. B. R. R. KUMAR
ORDER
PER SUCHITRA KAMBLE, JM
This appeal is filed by the assessee against order dated 31.01.2019 passed by Pr. Commissioner of Income Tax, Gurgaon under Section 263 of the Income Tax Act, 1961 for assessment year 2014-15.
The grounds of appeal are as under:- “That on the facts and in the circumstances of the case and in law the Ld. Pr. CIT erred in passing order under Section 263 of the Income Tax Act, 1961 (‘the Act’ for short) holding the order passed by the Dy. Commissioner of Income Tax, Circle – 3, Gurugram to be erroneous and prejudicial to the interest of revenue and directing a redo of the assessment is arbitrary,
erroneous and unlawful which must be quashed.”
The assessee furnished its return for A.Y. 2014-15 through online on 06.10.2014, declaring total deemed income of Rs. 20,300/-. The return was processed u/s 143(1) of the Income Tax Act, 1961 through the system, and refund claimed in the return at Rs. 2,11,300/- was allowed to the assessee company. Later on, the case was selected for scrutiny through CASS due to the reasons that “(i) Large share premium received during the year (ii) Unsecured loans from persons who have not filed their returns of income (form 3CD) and (iii) Mismatch in amount paid to related persons u/s 40A(2)(b) of the Act reported in the Audit Report and ITR.”Assessment was completed on 13.12.2016 thereby making addition of Rs. 54,000/- in respect of non-charging interest on loans raised from other persons and disallowance of Rs. 75,000/- in respect of expenses. Notices under Section 263 of the Income Tax Act, 1961 were issued on 29.11.2018 and 16.01.2019 by the Principal Commissioner of Income Tax – Gurgaon thereby asking the assessee to file reply and attend the proceedings as it was found that the assessment order passed by the Assessing Officer is erroneous and prejudicial to the interest of the Revenue due to the following reasons:- “During the year under consideration, the assessee company has issued total 39,510 shares @ Rs. 220/- per share to various parties against the face value of Rs. 10/- each and received share premium to the tune of Rs. 82,97,100/-. During the course of assessment proceedings, the 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. As such, the AO has failed apply his mind and to examine the same but completed the assessment after accepting the FMV as submitted, without verification. This non application of mind of the assessing Officer in framing the assessment order leads to completion of order as erroneous and prejudicial to revenue.”
After considering the reply/submissions of the assessee, the Pr. CIT set aside the Assessment order and directed the Assessing Officer to pass fresh assessment order after making thorough and detailed inquiries on this particular issue only.
Being aggrieved by the order under Section 263 of the Act passed by the Pr. CIT, the assessee filed present appeal before us.
The Ld. AR submitted that the Assessing Officer at the time of assessment proceedings has raised the query vide notice dated 12.08.2016 under Section 142(1) of the Act relating to party-wise detail, confirmation, ITR, balance sheet, bank statement of shares issued at premium of Rs.86,92,200/- as well as asking the details / calculation of FMV of the share issued along with information / data / projection provided by the assessee to the independent auditor for ascertaining FMV of the share. The Ld. AR also pointed out that in assessment year 2013-14 the AO has raised same query vide notice under Section 142(1) of the Act dated 2610.2016. The Ld. AR pointed out the letter dated 30.6.2016 given by the assessee as a reply to the notice under Section 142(1) of the Act along with the computation of income for assessment year 2014-15 with the copy of ITR as well as copy of audit report along with copy of audited trading account, profit and loss account, balance sheet and copy of capital for the year ending 31.03.2014. The Ld. AR pointed out the certificate issued by the CA related to fair market value of unquoted per equity share and its calculation from the page No. 64 of the Paper Book, which was the part of reply given to the Assessing Officer by the assessee. The Ld. AR, therefore, submitted that the Pr. CIT has over-looked the aspect that proper verification was done by the AO at the time of assessment proceedings under Section 143(3) of the Act. Thus, the order under Section 263 of the Act is not proper and the same should be quashed. The Ld. AR has also taken technical aspect in respect of notice issued under Section 263 of the Act, which is not mentioning the reason on which the Pr.
CIT has held that the assessment order is erroneous and prejudicial to the interest of revenue. The Ld. AR relied upon the decision of the Hon’ble Supreme Court in case of CIT vs. Max India Ltd 295 ITR 282, Malabar Industrial Co. Ltd. vs. CIT 243 ITR 83. The Ld. AR also relied upon the decision of the Jurisdictional High Court in case of CIT vs. Sunbeam Auto Ltd. 332 ITR 167 and ITO vs. DG Housing Projects Ltd. (2012) 74 DTR 153.
The Ld. DR submitted that valuation report referred by the assessee / Ld. AR was not before the Assessing Officer. Further the Ld. DR submitted that no verification relating to proper fair market value of share premium was done by the Assessing Officer as the Director who has taken the share was not called for and also no notice under Section 133(6) of the Act was issued. The Ld. DR relied upon the following decisions: i. Denial Merchants Pvt. Ltd. Vs. ITO (Appeal No. 2396/Del/2017 order dated 29.11.2017) ii. CIT vs. Amithabh Bachchan 384 ITR 200 (SC) order dated 11.05.2016 iii. Surya Jyoti Software Pvt. Ltd. Vs PCIT (I.T.A. No.2158/DEL/2017) ITAT Delhi order dated 08.01.2018 iv. Shankar Tradex Pvt. Ltd. vs. PCIT (ITA No. 2999/Del/2017 for A.Y. 2007-08 order dated 16.04.2018) v. Malabar Industrial Co. Ltd. Vs CIT [2000] 109 Taxman 66 (SC)/[2000] 243 ITR 83 (SC)/[2000] 159 CTR 1 (SC) vi. Rajmandir Estates (P.) Ltd. Vs PCIT [70 taxmann.com 124 (Calcutta)/[2016] 240 Taxman 306 (Calcutta)/[2016] 386 ITR 162 (Calcutta)/[2016] 287 CTR 512] vii. Rajmandir Estates (P.) Ltd. Vs PCIT [2017] 77 taxmann.com 285 (SC)/[2017] 245 Taxman 127 (SC) viii. Shree Manjunathesware Packing Products & Camphor Works Vs CIT [1998] 96 Taxman 1 (SC)/[1998] 231 ITR 53 (SC)/[1997] 143 CTR 406 (SC) ix. PTC Impex (India) Pvt. Ltd. vs. CIT (ITA No. 2860/Del/2010 dated 03.04.2018) x. CIT vs. Infosys Technologies Ltd. 341 ITR 293 order dated 04.01.2012 (Kar. HC) xi. CIT vs. Apollo Tyres Ltd. 65 ITD 263 xii. Gee Vee Enterprises vs. Addl. CIT 99 ITR 375 xiii. Perfetti Van Melle India Pvt. Ltd. (ITA No. 3046/Del/2016 order
dated 11.01.2019) xiv. Ramesh Kumar (ITA No. 1982/Del/2018 order dated 25.01.2019)
We have heard both the parties and perused the material available on record. It is pertinent to note that the Assessing Officer at the time of assessment order / proceedings has specifically raised queries relating to the fair market value of the unquoted per equity share and the related document were present before the AO while passing the final assessment order. After perusal of the document which were presented before the AO, we have noticed that the reasoning given by the Pr. CIT that the total share of 39,510 at Rs.220/- per share against the face value of Rs.10/- each and the received share premium to the tune of Rs.82,97,100/-, has totally ignored the explanation given by the Assessee before the Assessing Officer as well as before the Pr. CIT. The assessee has properly demonstrated through bank statement, the valuation under Rule 11UA along with audit report and audit trading account as relates to the FMV of the share premium. Thus, there is no prejudice to the revenue and Section 263 of the Act cannot be invoked in the present case. After going through the evidences and submissions the Assessing Officer passed the Assessment Order. While invoking Section 263 (1) of the Income Tax Act, 1961, the Pr. CIT has not made out the case that the Assessment Order is passed without making inquiries or verification which should have been made. There was no material brought by the Pr. CIT stating therein that the Assessment Order is passed allowing any relief without inquiring into the claim of the assessee. Thus, the Pr. CIT has only expressed the different view which is not permissible under Section 263 of the Act. Revisionary power u/s 263 of the Act is conferred by the Act on the Commissioner when an order is passed by the Authority is erroneous and prejudicial to the interest of the Revenue. Orders which are passed without inquiry or investigation are treated as erroneous and prejudicial to the interest of the Revenue, but which are passed after inquiry/investigation on the question/issue are not per se are normally treated as erroneous and prejudicial to the interest of the Revenue. Because, the Revisionary Authority feels and opines that further inquiry/investigation was required or deeper or further scrutiny should be undertaken, the same cannot be initiated without following the proper provisions u/s 263 of the Act. In the present case the Assessing Officer has made all the inquiries and after verifying the documents/ material on record passed a reasoned Assessment Order. Therefore, the Commissioner does not have any locus standi to make further inquiry. The decision of the Hon’ble Supreme Court in case of CIT vs. Max India Ltd 295 ITR 282, Malabar Industrial Co. Ltd. vs. CIT 243 ITR 83 are aptly applicable in the present case as the Hon’ble Apex Court wherein it is held that Section 263 has to be read in conjunction with the expression "erroneous" order passed by the Assessing Officer. Every loss of revenue as a consequence of an order of the assessing officer cannot be treated as prejudicial to the interests of the revenue. For example, when an Income Tax Officer adopted one of the courses permissible in law and it has resulted in loss of revenue; or where two views are possible and the Income Tax Officer has taken one view with which the Commissioner does not agree, it cannot be treated as an erroneous order prejudicial to the interests of the revenue unless the view taken by the Income Tax Officer is unsustainable in law. The case laws relied by the Revenue in respect of Section 263 also reiterates the said ratio as well. Some of the decisions relied by the Revenue are not at all applicable in the present case as distinguishing facts involved in those cases. Therefore, order u/s 263 of the Act in present appeal is not justified and is set aside herewith. Therefore, the order u/s 263 is passed by the Principal Commissioner of Income Tax is set aside.
In result, the appeal of the assessee is allowed Order pronounced in the Open Court on this 29th Day of June, 2021.