RADIANT LIFE CARE MUMBAI P. LTD.,MUMBAI vs. PR. CIT-3, MUMBAI

PER OM PRAKASH KANT, AM

These two appeals have been preferred by the assessee against the revision orders dated 31.03.2021 and 30.03.2021 passed by the Ld. Principal Commissioner of Income-Tax-3, Mumbai (in short ‘Ld.

ITA Nos. 895 & 296/M/2021 2 Radiant Life Care Mumbai

PCIT’) for assessment years 2015-16 & 2016-17 respectively. Being common issue-in-dispute involved, both these appeals were heard together and disposed off by way of this consolidated order for convenience and avoid repetition of facts.

ITA No. 895/MUM/2021 Assessment Year: 2015-16 2. First, we take up the appeal for AY 2015-16 having ITA No. 895/Mum/2021. The grounds raised by the assessee are reproduced as under:

“General ground 1. That the order passed by the Principal Commissioner of Income Tax ("Learned PCIT") under Section 263 of the Income Tax Act, 1961 ("'Act") is bad in law and void ab-initio. 2. That the order of the learned PCIT is bad in law, being based onsurmises and conjectures without any finding of fact as to how theorder passed under section 143(3) of the Act was erroneous orprejudicial to the interest of the revenue. Jurisdictional grounds / on merits 1. The learned PCIT erred in revising u/s 263 r.w Explanation 2 the assessment order passed us. 143(3) dt 29/12/2017 with respect to the issue of valuation of shares/charging of premium & depreciation on operation and management rights without appreciating that the

ITA Nos. 895 & 296/M/2021 3 Radiant Life Care Mumbai

assessment order passed by the Assessing Officer was neither erroneous nor prejudicial to the interest of the revenue and hence the order of revision is bad in law. 2. The learned PCIT failed to appreciate that the Assessing Officer has issued specific questions in the course of assessment proceedings in respect of valuation of shares/charging of premium depreciation on operation and management rights during the course of assessment proceedings and the assessee had furnished all details pertaining to the issue of valuation of shares/ chagrin of premium & depreciation on operation and management rights during the course of assessment proceedings and the learned Assessing Officer has accepted the valuation & allowed the depreciation after making proper & specific enquiry with reference to Section 56(2) (viib) for valuation of shares and Section 32 for depreciation on intangible asset. The assessment order was passed by the Assessing Officer after due application of mind and after making due investigation / enquiries, which fact is clearly borne from the assessment records and hence was not a case of lack of enquiry as envisaged in Explanation 2 to section 263 and hence the assessment order was neither erroneous nor prejudicial to the interest of the revenue and hence the order of revision is bad in law. 3. The Learned PCIT failed to appreciate that Section 56(2) (viib) is not attracted in the facts of the present case as Appellant has issued shares on premium on the basis of valuation report obtained from category-1 Merchant Banker and addition in subsequent assessment Year cannot have any impact in the current year as shares in both years are issued at premium on the basis of different valuation report and hence the order of revision is bad in law. 4. The learned PCIT erred in revising the order with respect to the issue of valuation of shares/charging of premium on wrong assumption of

ITA Nos. 895 & 296/M/2021 4 Radiant Life Care Mumbai

facts that the Valuation report showed profits whereas they actually showed losses and hence the order of revision is bad in law. 5. The Learned PCIT failed to appreciate that depreciation on Rs 25 crores paid to acquire operation and management rights is allowable u/s 32 and that the observation of PCIT that no intangible rights are acquired is not in accordance with law and hence the order of revision is bad in law. 6. Without prejudice to above, the learned PCIT has no jurisdiction to decide the issue on merit in revision jurisdiction by applying the wrong principle of law and relying on the case laws which are not applicable to the facts of the appellant particularly when according to him the Assessing Officer has not made verification/inquiry & hence the revision order may be set aside 7. Without prejudice to above, the learned PCIT failed to appreciate that on the issue of valuation of shares/charging of premium & depreciation on operation and management rights the Assessing Officer had adopted a possible view which view was not unsustainable in law and thus the assessment order cannot be termed as erroneous and prejudicial to the interest of the revenue and hence the order of revision is bad in law. 8. The appellant craves leave to add, amend, alter or delete any of the above grounds of appeal.” 3. Briefly stated, facts of the case are that the assessee-company was engaged in the business of operation and management of hospitals and for assessment year under consideration i.e. AY 2015- 16 , filed its return of income on 30.09.2015 declaring total loss of

ITA Nos. 895 & 296/M/2021 5 Radiant Life Care Mumbai

Rs.(-) 7,19,33,633/-. During the year under reference, the assessee- company entered into an operation and management agreement on 16.07.2014 for acquiring the Operation and Management Rights of “M/s Nanavati Hospital” for a period of 29 years and paid an amount of Rs.25 crores as non-refundable deposit. According to the assessee, the said amount was non-refundable, therefore, the assessee capitalized the said amount as intangible asset eligible for depreciation u/s 32 of the Income Tax Act, 1961 (in short ‘the Act’) and claimed depreciation on the same.

3.1 During the year under consideration, the assessee-company also issued and allotted 2,73,82,700 equity shares of Rs.10/- each at par to the ‘promoter group’ of the company and 2,63,08,700 equity shares of Rs.10/- each at premium of Rs.10/- per share to other persons.

3.2 The shares to the promoters were allotted during the period from 21.05.2014 (being the date of incorporation of the company)

ITA Nos. 895 & 296/M/2021 6 Radiant Life Care Mumbai

and upto 15.07.2014. It is the claim of the assessee that shares were issued to the promoters on the basis of the valuation done by category (I) Merchant Banker Spa Capital Advisors Limited vide its report dated 26.05.2014.

3.3 The assessee-company further allotted equity shares to ‘M/s Shrem Construction Private Limited’ during the period from 18.07.2014 to 13.02.2015 at fair market value of Rs.20/- (Rs.10/- against face value and Rs.10/- as share premium). It is the claim of the assessee that value of the shares of the company was enhanced due to an agreement entered into by the assessee-company on 16.07.2014 with Dr. Balabhai Nanavati for acquiring the Operation and Management Rights of M/s Nanavati Hospital for a period of 29 years. The assessee claimed that fair market value of Rs.20/- per equity share was arrived at on the basis of valuation report dated 17.07.2014 on category-I Merchant Banker Spa Capital Advisors Limited.

ITA Nos. 895 & 296/M/2021 7 Radiant Life Care Mumbai

3.4 The return of income filed by the assessee was selected for scrutiny and statutory notices under the Act was issued and complied with. The Assessing Officer accepted the returned income vide assessment u/s 143(3) of the Act dated 29/12/2017, with following finding:

“5. After verification of the details filed during the course of assessment proceedings, the return of income filed by the assessee- company is accepted as per below computation of income: Rs. I Business Income (as per (8,05,29,799) return) II Income from Other Sources 85,96,166/- (as per return) Total Income (7,19,33,633)

MAT Calculation u/s 115JB of the Act Rs. Book Profit (as per computation) (2,35,59,394) Tax @ 18.5% Nil Since the assessee has book loss the provisions of section 115JB of the Act is not applicable.” 4. Subsequently, the Ld. PCIT called for the records and after examination of the records, he was of the view that assessment order dated 29.12.2017 passed by the Assessing Officer u/s 143(3) of the Act, was erroneous in so far as prejudicial to the interest of

ITA Nos. 895 & 296/M/2021 8 Radiant Life Care Mumbai

the Revenue and therefore, he issued notice u/s 263 of the Act show causing to the assessee as to why the assessment order should not be set aside/cancelled being erroneous in so far as prejudicial to the interest of the Revenue , on the ground of no inquiries carried out in respect of receiving share premium as well as depreciation on the deposit of Rs.25 crores to the person running the Nanavati Hospital.

ITA Nos. 895 & 296/M/2021 9 Radiant Life Care Mumbai

7.1 Before us, the Ld. counsel of the assessee contended that during the course of assessment proceedings u/s 143(3), the Assessing Officer had issued notice u/s 142(1) of the Act dated 04.09.2017 and raised specific queries on the issue of details of large share premium received by the assessee and introduction addition on intangible assets during the year. The Ld. counsel referred to page 72 of the Paper Book in this regard. He further submitted that vide letter dated 12.10.2017 (APB 131) the assessee submitted

ITA Nos. 895 & 296/M/2021 10 Radiant Life Care Mumbai

details of the shares allotted during the year under consideration along with valuation report. He further submitted that assessee- company also submitted balance sheet and Income-Tax Return of the share applicants vide its letter dated 06.11.2017, which is placed at page 73-81 of the Paper Book.

The Ld. counsel further submitted that Assessing Officer verified all the details submitted by the assessee vide above two letters i.e. letter dated 12.10.2017 and 06.11.2017, and thereafter show caused to the assessee as to why the provisions of section 56(2)(viib) of the Act should not be applied to the shares allotted during the year by the assessee-company and depreciation on the intangible assets should not be disallowed. The Ld. counsel submitted that assessee-company vide its letter dated 01.12.2017, a copy of which is placed on page 83 to 86 of the Paper Book, gave detailed legal submission on both issues. In view of above, the Ld. counsel of the assessee is of the view that the Assessing Officer thoroughly verified the issue of share premium and deprecation of

ITA Nos. 895 & 296/M/2021 11 Radiant Life Care Mumbai

Operation Management Rights. The Ld Counsel relied on few judgment, which are discussed in subsequent paragraphs.

7.2 Whereas, on the other hand, the Ld. Departmental Representative (DR) disputed the factual submissions of the Ld. counsel of the assessee. The Ld. DR submitted that the Assessing Officer merely issued a letter calling for information about the issues on the basis of which the case was selected for scrutiny. Further, he submitted that contention of the Ld. counsel that the Assessing Officer issued show cause to the assessee on the issue of application of provisions of section 56(2)(viib) is factually incorrect. According to him, no inquiry was conducted by the Ld. Assessing Officer on the issue of the application of the provision of section 56(2)(viib) in respect of share premium and depreciation on the deposit. He further submitted that in the case of the assessee, scrutiny proceedings have been conducted through e-assessment mode wherein the Assessing Officer was required to raise the inquiries through E-mail and assessee was also supposed to respond

ITA Nos. 895 & 296/M/2021 12 Radiant Life Care Mumbai

through the E-mail only , but in the present case, the submission dated 01.12.2017 claimed to have been filed before the Assessing Officer physically do not contain any stamp of the receipt of the office of Assessing Officer and even said letter has not been filed through E-mail.

7.3 We have heard rival submission of the parties and perused the relevant material on record. For an assessment order to be held liable to revision under section 263 of the Act, the twin conditions, firstly, order to be a erroneous and secondly, order prejudicial to the interest of the Revenue, should be satisfied simultaneously. The Hon’ble Delhi High Court in the case of GEE VEE Enterprises Private Limited versus CIT [1975] 99 ITR 375 (Delhi) held that the CIT may consider the order of the Income Tax Officer as erroneous not only because it contains some apparent error of reasoning or of law or of fact on the face of it but also because it is a stereo-typed order which simply accepts what the assessed has stated in his return

ITA Nos. 895 & 296/M/2021 13 Radiant Life Care Mumbai

and fails to make inquiries which are called for in the circumstances of the case. The Hon’ble Delhi High Court referred to the two decision of the Hon’ble Supreme Court in the case of Rampyari Devi Saraogi v. Commissioner of Income Tax, (1968)67 I.T.R. 84 (12), and Tara Devi Aggarwai v. Commissioner of Income Tax, (1973) 88 ITR 323 (13) and observed that it is not necessary for the Commissioner to make further inquiries before cancelling the assessment order of the Income Tax Officer. The Commissioner can regard the order as erroneous on the ground that in the circumstances of the case the Income Tax Officer should have made further inquiries before accepting the statements made by the assessed in his return.

7.4 The Hon’ble Delhi High Court (supra) justified making of inquiries by the Assessing Officer observing as under:

“(14) The reason is obvious. The position and function of the Income Tax Officer is very different from that of a civil court. The statements A made in a pleading proved by the mininum amount of evidence may he accepted by a civil court in the absence of any rebuttal. The civil court is nuctral. It simply gives decision on the basis of the pleading and evidence which comes before it. The Income Tax

ITA Nos. 895 & 296/M/2021 14 Radiant Life Care Mumbai

Officer is not only an adjudicator but also an investigator. He cannot remain passive in the face of a return which is apparently in order but calis for further inquiry. It is his duty to assertain the truth of the faets stated in the return when the circumstances of the case are such as to provoke an inquiry. The meaning to be given to the word "erroneous" in section 263 emerges out of this contract. It is because it is incumbent on the Income Tax Officer to further investigate the facts stated in the return when cireuinstances would make such an inquiry prudent that the word "erroneous" in section 263 includes the failure to make such an inquiry. The order becomes erroneous because such an inquiry has not been made and not because there is any thing wrong with the order if all the facts stated therein are assumed to be correct.

Nor can ii be said that it was necessary for the Commissioner to himself make such inquiry before cancelling the order of assessment.”

7.5 Similarly, Hon’ble Calcutta High Court in the case of CIT Central-1 Vs Maithan International (Cal) IT Appeal No. 53 of 2012 has observed as under :

“It is not the law that the Assessing Officer occupying the position of an investigator and adjudicator can discharge his functions by perfunctory or inadequate investigation. Such a course is bound to result in erroneous and prejudicial orders. Where the relevant enquiry was not undertaken, as in this case, the order is erroneous and prejudicial too and therefore revisable. Investigation should always be faithful and fruitful. Unless all truthful areas of enquiry are pursued the enquiry cannot be said to have been faithfully conducted.”

ITA Nos. 895 & 296/M/2021 15 Radiant Life Care Mumbai

7.6 The Hon’ble Delhi High Court has again emphasized in the case of ITO versus DG Housing Projects Ltd. ITA 179/2011 that where there is complete lack of enquiry on the part of the Assessing Officer. The assessment order is erroneous the relevant observation of the Hon’ble High Court are as under :

“A distinction must be drawn in the cases where the Assessing Officer does not conduct an enquiry; as lack of enquiry by itself renders the order erroneous and prejudicial to the interests of the Revenue and cases where the Assessing Officer conducts an enquiry but the finding recorded is erroneous and which is also prejudicial to the interests of the Revenue. In the latter cases, the Commissioner has to examine the order or the decision taken by the Assessing Officer on the merits and then form an opinion on the merits that the order passed by the Assessing Officer is erroneous and prejudicial to the interests of the Revenue. In the second set of cases, the Commissioner cannot direct the Assessing Officer to conduct further enquiry to verify and find out whether the order passed is erroneous or not.” 7.7 Further, we also find that in terms of Explanation-2 below section 263 of the Act, which has been made effective from assessment year 2015-16 w.e.f. 01.06.2015, an assessment order is deemed to be erroneous insofar as prejudicial to the interest of the Revenue, if the Assessing Officer fails to carry out the inquiries,

ITA Nos. 895 & 296/M/2021 16 Radiant Life Care Mumbai

which ought to have been carried out in the facts and circumstances of the case.

7.8 In view of the above judicial precedents and the amendment introduced by the Parliament by way of Explanation-2, if the Assessing Officer failed in carrying out the enquiry which ought to have been carried in the fact and circumstances of the case, then assessment order is obviously erroneous.

7.9 The issue in dispute in the case of assessee before us, is that whether inquiry was conducted by the Assessing Officer during assessment proceeding on the two issues, firstly, applicability of section 56(2)(viib) on share premium received, secondly, depreciation on deposit of Rs. 25 crores for intangible rights.

7.10 In the case of the assessee, assessment for both the assessment years 2015-16 and 2016-17 were taken up for e-assessment mode through e-filing portal. The salient feature of E-proceedings

ITA Nos. 895 & 296/M/2021 17 Radiant Life Care Mumbai

enclosed by the Income-tax Department along with the notice under

section 143(2) of the Act is reproduced as under:

“Salient feature of ‘E-Proceedings’

 As part of e-governance initiative to facilitate conduct of assessment proceedings electronically, Income-tax Department has launched ‘E-Proceeding’ facility. It is a simple way of communication between the Department and assessee, through electronic means, without the necessity to visit Income-tax Office for conduct of assessment proceedings. This taxpayer friendly measure would substantially reduce the compliance burden for the assessee.  In assessment proceeding, ‘E-Proceeding’ would enable seamless flow of Letter(s)/ Notice(s), Questionnaire(s), Order(s), etc. from Assessing Officer to the concerned assessee’s in ‘e-Filing’ website. On receipt of Departmental communication, assessee would be able to submit the response along with attachments by uploading the same, on ‘e-Filing’ portal. The response submitted by the assessee would be viewed by the Assessing Officer electronically in Income Tax Business Application (ITBA) module. This would, besides saving precious time of the assessee, would also provide a 24X7 anytime/ anywhere convenience to submit response to the Departmental queries in course of assessment proceedings. The taxpayers, who are not yet having an account on the e-Filing website of the Income-tax Department, are requested to get registered by the following simple instruction in the e-Filing website (www.incometaxindiafiling.gov.in).  Assessee would retain complete information of all e-submissions made during the course of assessment proceedings through ‘E-Proceeding’ facility for reference & record purpose in his e-Filing portal account.

ITA Nos. 895 & 296/M/2021 18 Radiant Life Care Mumbai

 Hearing/submission of the document(s) may be conducted manually, if required, in following situation(s): i. where manual books of accounts or original documents have to be examined; ii. where Assessing Officer invokes provisions of section 131 of the Income-tax Act, 1961; iii. where examination of witness is required to be made by the concerned assessee or the Department. iv. where a show-cause notice contemplating any adverse view is issued and assessee requests for personal hearing to explain the matter.” 7.11 In view of facility of e-assessment proceeding extended to the assessee, notice, questionnaire etc were available to the assessee in his account on e-filing website and the assessee was required to respond those notices by way of uploading reply along with enclosures on the e- portal of the Income-tax Department.

7.12 Before us, for AY 2015-16, in support of the claim that the Assessing Officer has carried out inquiries on the issues under reference i.e. applicability of section 56 (2)(viib) and depreciation on deposit of ₹ 25 crore, the assessee has refereed to one notice dated 04/09/2017 u/s 142(1) of the Act issued by the Assessing officer. The assessee has also referred to three replies filed by it

ITA Nos. 895 & 296/M/2021 19 Radiant Life Care Mumbai

before the Assessing Officer. It has been claimed by the assessee that same were filed physically in the office of the Assessing officer. On perusal of copy of those letters filed by the assessee, we find that letter dated 12/10/2017 and 6/11/2017 carry a stamp of the office of the Assessing officer of same date, though inward number are not mentioned. On letters dated 1/12/2017, there is no stamp of receiving office. In view of no clear evidence of filing the said letter either on e-proceeding portal or filed physically, the Ld. DR was asked to produce the assessment folder for verification. The Ld. DR during the hearing submitted a letter from the Assessing Officer, wherein he submitted that the physical assessment folder for AY 2015-16 was not traceable and he provided a copy of note sheet (order sheet) recorded on the e-portal. The letter dated 01.12.2017 claimed to have filed by the assessee before the AO is not found to be recorded in said note sheet. In this regard, the assessee filed an affidavit from its Authorized representative during assessment proceedings (Chartered Accountants Sh. Manoj Kumar More and Sh

ITA Nos. 895 & 296/M/2021 20 Radiant Life Care Mumbai

Narottam Bagaria) which says that letter was filed before the Assessing Officer. But, the present Assessing Officer in his submission dated 15/03/2022, filed before the Bench through Ld. DR, has submitted that there was no stamp of the office of the AO on letter dated 01/12/2017 of the assessee. The Ld. DR submitted that in absence of the assessment record it could not be proved that the assessee filed said letter before the Assessing Officer and the onus was of the assessee to prove, as it is the assessee who is making the claim.

7.13 In back ground of the above facts, we have to decide whether the Ld AO has carried out the enquiry on the two issues i.e. applicability of section 56 (2)(viib) and depreciation on deposit of ₹25 crore.

7.14 We find that the Assessing Officer has only issued notice dated 04/09/2017 u/s 142(1) of the Act, calling for the information from the assessee on the issues (i) including large share premium

ITA Nos. 895 & 296/M/2021 21 Radiant Life Care Mumbai

received during the year and applicability of section 56(2)(viib) of the Act (ii) addition of intangible asset during the year. Contents of said letter are reproduced as under :

ITA Nos. 895 & 296/M/2021 22 Radiant Life Care Mumbai

7.15 We find that the Assessing Officer has simply asked the submission of the assessee on the reasons for which the case was selected for scrutiny. In this letter , no where it as asked as on which shares issued, either to the promoters or other persons , share premium has been charged. Actually, all these facts that during the year assessee has issued equity share at par as well as with premium of Rs. 10 per share, came on record only after filing the information by the assessee in response to notice u/s 142(1) of the Act dated 04.09.2017.

7.16 Thereafter, the assessee in letter dated 12/10/2017 has filed the factual copy of the valuation reports of merchant banker justifying the share premium of ₹ 10 per share. The Ld. PCIT in the impugned order has pointed out that between the period from 21/05/2014 to 15/07/2014 shares have been issued to the promoters without charging share premium that too on the basis of valuation report dated 26/05/2014. But the same shares have been

ITA Nos. 895 & 296/M/2021 23 Radiant Life Care Mumbai

allotted at the rate of the premium of ₹ 10 per share between the period from 18/07/2014 to 13/02/2015 on the basis of the another valuation reports dated 17/07/2014 and 05/01/2015.

7.17 The Ld. PCIT in respect of these two valuation reports has observed that the Assessing Officer was required to enquire and verify the basis of the valuation as it was one of the reason for selection of the case for scrutiny under Computer Assisted Selection of Scrutiny (CASS), but no verification or enquiry was conducted by the Assessing Officer. The Ld. PCIT pointed out that in the valuation report, it was specifically mentioned that financial and other information used in the valuation were provided by the assessee- Company and accuracy and completeness of such information was not examined by the Ld. Assessing Officer. He further observed that it was mentioned in the valuation report that conclusions were dependent on such information being complete and accurate in all material aspect. In the opinion of the Ld. PCIT, the aforesaid facts

ITA Nos. 895 & 296/M/2021 24 Radiant Life Care Mumbai

and assertions could have been alerted the Assessing Officer to question the reliability of such valuation report and to undertake a proper verification or enquiry on the issue of the share premium, however no such verification or enquiry was conducted by the Assessing Officer. We concur with the above observations of the Ld. PCIT. The AO has been given duty not only to adjudicate the issue in dispute but also to investigate the matter, but he has simply placed those valuation reports on record and did not attempt to verify as why the share premium has been charged on one set of equity shares, whereas not charged in another set of equity shares that too issued in same financial year. Regarding the depreciation also the Assessing Officer has not made any enquiry after receipt of information from the assessee, as to how the advance paid to seller party will become intangible property of the assessee eligible for depreciation. The AO was required to enquire ownership of the said intangible right in the hands of the assessee, but nothing on record , which could show that he had made any enquiry.

ITA Nos. 895 & 296/M/2021 25 Radiant Life Care Mumbai

7.18 Before us the Ld. counsel of the assessee submitted that after verifying the details filed by the assessee i.e. letter dated 12/10/2017 and 06/11/2017, the Assessing Officer issued show cause to the assessee as why (i) the provision of section 56 (2)(viib) should not be applied on the shares allotted during the year (ii) depreciation of intangible asset should not be disallowed (sic), but no such copy of the show cause letter issued by the Assessing Officer has been produced before us. In absence of any such document, it cannot be presumed existence of such show cause. It has been claimed by the assessee of filing reply on 01/12/2017 in response to alleged show cause notice, but filing of said reply before the AO is also not proved in absence of any stamp of the receiving authority on said letter. Thus, there is no evidence on record, which could show that the Assessing Officer has made enquiry on the issue of applicability of section 56(2)(viib) of the Act and eligibility of depreciation on deposit made the person running the Nanawati Hospital as how the same was an intangible asset in the hands of the

ITA Nos. 895 & 296/M/2021 26 Radiant Life Care Mumbai

assessee. Merely placing of certain information by the assessee on the issue in dispute cannot be termed as conducting of enquiry by the Assessing Officer. The Assessing Officer is not only adjudicator, but he is the investigator also as prior to adjudication of the issue, he is required to thoroughly investigate the issue by way of the inquiries, for which he has been given powers under the Act which include raising of queries under section 142(1) of the Act, issuing notice under section 133(6) of the Act to 3rd parties or issue of summon u/s 131 of the Act for attendance of the witnesses etc. But no such inquiries were carried out by the assessee on the pile of information filed by the assessee. In view of above facts and circumstances, we are of the opinion that no enquiry has been carried out by the Assessing Officer on the two issues of i.e. applicability of section 56 (2)(viib) and depreciation on deposit of ₹25 crore.

ITA Nos. 895 & 296/M/2021 27 Radiant Life Care Mumbai

7.19 Before us, the Ld. counsel of the assessee has relied on the decision of Hon’ble Delhi High Court in the case of CIT Vs Sunbeam Auto Ltd (2011) 332 ITR 167 (Delhi), wherein it is held that since the enquiry was specifically held with reference to the expenditure on dies by the AO in original assessment proceedings, therefore invoking the revisionary jurisdiction under section 263 was not justified with respect to said expenditure.

7.20 In another case relied upon by the Ld. counsel of the assessee of Hon’ble Bombay High Court in the case of CIT Vs Development Credit Bank Ltd (2010) 323 ITR 206 (Bom) also the Hon’ble High Court held that since the enquiry was specifically held with reference to the issue of capital gain by the AO in original assessment proceedings, therefore invoking the revisionary jurisdiction under section 263 on the issue of the capital gain was not justified.

ITA Nos. 895 & 296/M/2021 28 Radiant Life Care Mumbai

7.21 When we compare the facts of the instant case before us with the above cases cited by the Ld. counsel of the assessee, we find that in our case no enquiry has been conducted by the Assessing Officer and therefore, ratio in the above cases cannot be applied over the facts of the instant case.

7.22 Further, the Ld. counsel of the assessee relied on the decision of Hon’ble Gujarat High Court in the of Pr. CIT v. Shreeji Prints (P.) Ltd. [2021] 130 taxmann.com 293 (Gujarat) (HC) wherein it is held that if the Explanation-2 to section 263 is not invoked in the show cause letter issued, the Ld. PCIT is not justified in invoking said Explanation while holding order as erroneous and prejudicial to the interest of Revenue. On perusal of the impugned order, we find that Ld. Pr. CIT has held the assessment order erroneous in view of complete lack of inquiries by the Assessing Officer on the two issues of applicability of section 56(2)(viib) and depreciation on deposits in para 4.1 of the impugned order and held the order erroneous on

ITA Nos. 895 & 296/M/2021 29 Radiant Life Care Mumbai

the issue of no inquiry in respect of applicability of section 56(2)(viib) of the Act. In para 4.2 of the impugned order, the Ld. PCIT has held the order as erroneous in so far as prejudicial to the interest of the Revenue in view of no inquiry carried out by the Assessing Officer on depreciation on deposit of Rs.25 crores. In addition to the para 4.1 and 4.2 of the impugned order, in para 5 the Ld. PCIT has referred to Explanation 2 to section 263 and therefore, in our opinion it cannot be said that Ld. PCIT has the order erroneous only on the basis of the Explanation-2 to section 263 of the Act. In view of the above, reliance placed by the Ld. counsel of the assessee on the said decision is not relevant to the facts of the case.

7.23 Further, the Ld. counsel of the assessee submitted that Assessing Officer has already made view on the issue of applicability of section 56(2)(viib) and depreciation on deposits and therefore Ld. PCIT was not justified in taking different view when the

ITA Nos. 895 & 296/M/2021 30 Radiant Life Care Mumbai

Assessing Officer adopted one of the two permissible view in the law. In support of contention, the Ld. counsel relied on the decision of the Hon’ble Supreme Court in the case of Malbar Ind. Co. Ltd. v. CIT (2000) 243 ITR 83 (Supreme Court) and CIT v. Max India Ltd. (2007) 295 ITR 282 (SC) and CIT v. Nirav Modi [2017] 390 ITR 292 (Bombay). In our opinion, the Assessing Officer has not enquired the matter on those two issues at all and the question of making a view on those issues is too far. Therefore, ratios of the above decisions relied upon can’t be relied in the fact of the case.

7.24 The Ld. counsel submitted that revisions cannot be sustained on the basis of assessment order of subsequent year due to review/change of opinion, because the Ld. PCIT has relied the decision of the Assessing Officer in AY 2017-18 wherein also shares are allotted but the basis of valuation was different in the said assessment year. In our opinion, the Assessing Officer has not analyzed the information supplied by the assessee and he simply

ITA Nos. 895 & 296/M/2021 31 Radiant Life Care Mumbai

accepted whatever filed by the assessee. In such circumstances, we can’t say that he has made any opinion or taken a particular view. Thus, no issue of change of opinion is involved in the case before us.

7.25 In view of the above facts and circumstances and discussion we are of the opinion that there is no error in the order of the Ld. PCIT and accordingly we uphold the same. The grounds raised by the assessee for AY 2015-16 are accordingly dismissed.

ITA No. 896/MUM/2021 Assessment Year: 2016-17 8. Now we take up the appeal of the assessee for assessment year 2016-17. The grounds identical to what have been raised in assessment year 2015-16, have been raised by the assessee in the year under consideration also. In the assessment year under consideration, the assessee has issued and allotted 1,07,38,281 equity shares of ₹ 10 each at premium of ₹ 10 per share. It is the submission of the assessee that premium has been charged on the basis of the valuation report of the merchant banker. In the year

ITA Nos. 895 & 296/M/2021 32 Radiant Life Care Mumbai

under consideration, the assessing officer issued notice under section 142(1) dated 8/08/ 2018, wherein he called for the information from the assessee in respect of the large share premium and applicability of section 56(2)(viib) in identically worded query as was asked in notice under section 142(1) dated 04/09/2017 for assessment year 2015-16, which has been held by us as no enquiry conducted. The Ld. counsel of the assessee referred to page 86 to 89 of the paperbook and submitted that assessee filed response of the notice dated 8/8/2018 by way of letter dated 08/11/ 2018 and provided details of share allotted along with valuation report. According to the Ld. counsel, as far as issue of the depreciation is concerned, it was allowed by the Assessing Officer in the earlier assessment year i.e. 2015-16 and Assessing Officers being same, in his opinion, the assessing officer had thoroughly verified the issue of taxability of share premium and the depreciation on operation and management rights.

ITA Nos. 895 & 296/M/2021 33 Radiant Life Care Mumbai

Order pronounced in the open Court on 31/05/2022. Sd/- Sd/- (KAVITHA RAJAGOPAL) (OM PRAKASH KANT) JUDICIAL MEMBER ACCOUNTANT MEMBER Mumbai; Dated: 31/05/2022 Rahul Sharma, Sr. P.S. Copy of the Order forwarded to : 1. The Appellant 2. The Respondent.

ITA Nos. 895 & 296/M/2021 34 Radiant Life Care Mumbai