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Income Tax Appellate Tribunal, “D”, BENCH
Before: SHRI M.BALAGANESH, AM & SHRI AMARJIT SINGH, JM Shri
आदेश / O R D E R PER M. BALAGANESH (A.M): This appeal is directed against the order passed by the ld. Administrative Commissioner (PCIT-3)- Mumbai u/s.263 of the Act dated 16/11/2008 treating the proceedings of the ld. DCIT Circle-3(2)(2), Mumbai dated 12/09/2017 as erroneous and prejudicial to the interest of the revenue. 2. The only issue involved in this appeal is as to whether the ld. CIT was justified in invoking revisionary jurisdiction u/s.263 of the Act.
The brief facts of this issue are that the assessee filed its return of income for A.Y.2010-11 on 30/07/2010 declaring total income of Rs.3,61,863/- which was accepted u/s.143(1) of the Act. Subsequently, on the basis of information received from Dy. Director of Income Tax- Investigation, Unit-(4)(2), Mumbai, the assessment was sought to be reopened u/s.147 of the Act after recording the following reasons:-
“The assessee has filed his return of income for AY 2010-11 on 30/07/2010 declaring total income of Rs. 3,61,863/-. T he return was processed u/s 143(1 ) dtd. 01.05.2011 accepting the returned income. It is seen that Pacific Capital Services Pvt Ltd has transferred 2498 shares of Nupower Renewables Pvt Ltd to Mr. Deepak Kochhar on 05.06.09 i.e. in FY 2009-10. The face value of the share is Rs.10/- per share. The book value of share as on 31. 03. 10 as per audited financials of Nupower Renewables Pvt.Ltd. is at Rs.219.56 per share. It is observed that no capital gain has been offered to tax by Pacific Capita! Services Pvt. Ltd in its ROI for AY 2010-1 I, suggesting that the transaction has happened at face value of Rs.10/- per share Therefore, in the given ease, the provisions of Section 56(2) are applicable on the above transaction and an amount of Rs 5.47.062/- which is changeable in the hands of Mr. Deepak Kochhar should be taxed as income from other sources. Income from other sources 56. (2) In particular, and without prejudice to the generality of the provisions of sub-section (1), the following incomes, shall be chargeable to income-tax under the head "Income from other source”, namely:- (vii) where an individual or a Hindu undivided family receives in any previous year, from any person or persons on or after the 1st Day of October, 2009. (c) any property, other than immovable property – (i) without consideration, the aggregate fair market value of which exceeds fifty thousand rupees, the whole of the aggregate fair market value of such property (ii) for a consideration which is less than the aggregate fair market value of the property by an amount exceeding fifty thousand rupees, the aggregate fair market value of such property as exceeds such consideration. In view of all the above, I have reason to believe that income assessable to tax has escaped assessment and notice u/s.148 is issued.”
(Underlining provided by us)
3.1. The assessee filed objections to the said reasons during the course of re-assessment proceedings and the ld. Assessing Officer dropped the re-assessment proceedings vide proceedings dated 12/09/2017. The relevant notings of the ld. AO in this regard are as under:- “Proceedings u/s.147 of the IT Act 1961 initiated vide issue of notice u/s.148 of the IT Act, 1961 of the Act dated 30/03/2017 are hereby dropped.”
3.2. Subsequently, the ld. CIT sought to treat the aforesaid noting made by the ld. AO as an order passed by him and treated the said order as erroneous in as much as it is prejudicial to the interest of the revenue. The ld. CIT observed that the ld. AO had dropped the proceedings by accepting the assessee’s contention at the objection stage itself without necessary enquiries, without cross verification of facts and without checking and verifying the correctness of the claim of the assessee regarding date of purchase of said shares and other relevant information including fair market value of shares. He observed that there was neither enquiry nor examination by the ld. AO to verify the correctness of any of the claims made by the assessee. Accordingly, he set aside the proceedings of the ld. AO and directed the ld. AO to pass afresh order after making necessary and comprehensive enquiry as per law.
Aggrieved the assessee is in appeal before us.
We have heard rival submissions and perused the materials available on record. The ld. CIT has sought to invoke the provisions of Section 56(2)(vii) of the Act in the hands of the assessee being a buyer of shares of Nu Power Renewables Pvt. Ltd. From the reasons recorded by the ld. AO, we find that the ld. AO had indeed accepted the date of purchase of shares by the assessee to be on 05/06/2009. From para 2 of the reasons recorded reproduced hereinabove, it could be seen that M/s. Pacific Capital Services Pvt. Ltd. had transferred 2498 shares of Nu Power Renewables Pvt. Ltd., to assessee on 05/06/2009 at face value of Rs.10/- per share. The book value of shares as on 31/03/2010 as per audited financials of Nu Power Renewables Pvt. Ltd. was Rs 219.56. Accordingly, the ld. AO originally reopened the assessment by issue of notice u/s.148 of the Act on 30/03/2017 to bring to tax the difference between the book value per share and the face value per share as income u/s.56(2)(vii) of the Act in the hands of the buyer of the shares i.e. the assessee herein. In this regard, it is pertinent to note that the provisions of Section 56(2)(vii) categorically states that it is applicable only from 01/10/2009. The said provisions were introduced in the statute only from 01/10/2009. In the instant case, the purchase transactions of the shares has been carried out by the assessee on 05/06/2009 i.e prior to the introduction of Section 56(2)(vii) of the Act. Hence, the provisions of Section 56(2)(vii)of the Act could not be made applicable to the facts of the instant case. These points were specifically raised in the form of objections to the reasons recorded by the assessee before the ld. AO during the course of re-assessment proceedings. The ld. AO on due appreciation of these facts and the prevailing law applicable thereon duly dropped the re-assessment proceedings. While that is so, there cannot be any error that could be attributed in the said proceedings of the ld. AO, hence, there is no scope for the ld. CIT to even say that there was any order that was passed by the ld. AO and that the said order was erroneous and prejudicial to the interest of the revenue. In fact in the instant case, though the proceedings were dropped by the ld. AO, we find that the ld. AO had mentioned as order passed u/s.143(3) r.w.s. 147 of the Act dated 12/09/2017. Merely because this has been mentioned, the said proceedings would not become an order warranting any revisionary jurisdiction u/s.263 of the Act. Infact, the ld. AO had at the threshold stage itself dropped the re-assessment proceedings on his own after considering the objections of the assessee. Admittedly, no notice u/s.143(2) of the Act or notice u/s.142(1) of the Act were served on the assessee during the course of re-assessment proceedings as could be evident from the proceedings of the ld. AO reproduced hereinabove.
Hence, for all practical purposes, the proceedings recorded by the ld. AO could not be construed as a legal order in the eyes of law, which could be subjected to any revision jurisdiction u/s.263 of the Act or which could be subject matter of any appeal. In these circumstances, it could be safely concluded that there was no order per se passed by the ld. AO which could be treated as an erroneous order in as much as it is prejudicial to the interest of the revenue warranting revision u/s.263 of the Act by the ld. CIT. In any case, even if it is to be construed as an order, the ld AO had applied his mind on the then prevailing law by appreciating that the provisions of section 56(2)(vii) of the Act were not applicable and accordingly had dropped the proceedings. This would certainly tantamount to taking a possible view by the ld AO as per the then prevailing law. Hence the same cannot be the subject matter of revision u/s 263 of the Act. Accordingly, the revision order passed by the ld. CIT deserves to be quashed and is hereby quashed. Accordingly, the grounds raised by the assessee are allowed.
6. In the result, appeal of the assessee is allowed. Order pronounced in the open court on this 02/08/2019