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Facts
The Assessee filed a return of loss for AY 2018-19, and the assessment was completed by the National E-assessment Center. Subsequently, the PCIT invoked revisionary jurisdiction under Section 263 of the Income Tax Act, alleging that the Assessing Officer failed to include income under Section 56(2)(x)(c)(B) related to the purchase of shares where the Fair Market Value (FMV) exceeded the purchase consideration, thus deeming the assessment erroneous and prejudicial to the revenue's interest.
Held
The Tribunal observed that the Assessing Officer had conducted an elaborate inquiry and adopted a plausible view in the original assessment. Citing Supreme Court precedents like Malabar Industrial Co. Ltd., the Tribunal held that if two plausible views are possible and the AO adopts one, it cannot be considered an erroneous order prejudicial to the revenue unless that view is unsustainable in law. The PCIT's order was found to be erroneous and was accordingly quashed.
Key Issues
Whether the PCIT was justified in invoking Section 263 to set aside an assessment order when the Assessing Officer had conducted proper inquiries and adopted a plausible view regarding the valuation of shares and the applicability of Section 56(2)(x)(c)(B) of the Income Tax Act.
Sections Cited
263, 56(2)(x)(c)(B), 143(3), 143(3A), 143(3B), 143(2), 142(1), 14A, Rule 8D
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Income Tax Appellate Tribunal, DELHI BENCH ‘E’: NEW DELHI
availed by the Assessee, his order cannot be construed as erroneous.
From the above, it is observed that it is not a case wherein the Assessing Officer failed to conduct enquiry rather it is the case wherein the Assessing Officer has conducted an elaborate enquiry and adopted one of the two views which was plausible view. The question would be as to whether in such circumstances the power u/s 263 of the Act would be invoked or not. The above said question is no longer res-integra and the said issue is well settled in several decisions. In the case of Malabar Industrial Co. Ltd. vs. Commissioner of Income Tax, (2000) 243 ITR 83 (SC). The Hon’ble Supreme Court held as follows :-
M/s Ozone Overseas (P) Ltd. vs. PCIT
“The phrase “prejudicial to the interests of the Revenue” has to be read in conjunction with an 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 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.”
Further, the Hon’ble Supreme Court in the case of Pr. CIT vs. Canara Bank Securities Ltd., S.L.P.(C) No. 25651 of 2019, vide order dated 14th October, 2019 dismissed the Department’s appeal affirming the view taken by the Bombay High Court in of 2016, dated February 11, 2019, wherein the High Court held that the question whether the income should be taxed as business income or has arisen from other source was a debatable issue and the Assessing Officer had taken the plausible view that it was a business income after due enquiries and therefore not open for the Commissioner to take such an order in revision. Therefore, following the ratio laid down by the Hon’ble Supreme Court in Malabar Industrial Co. Ltd. vs. Commissioner of Income Tax (supra) and other decisions mentioned above, we Page 17 of 18
M/s Ozone Overseas (P) Ltd. vs. PCIT are of the considered opinion that the impugned order of the Ld. PCIT is found to be erroneous, accordingly, order impugned of the Ld. PCIT is hereby quashed. 15. In the result, appeal filed by the Assessee is allowed. Order pronounced in open Court on 23rd February, 2024.