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2019 (11) TMI 1786 - AT - Income TaxRevision u/s 263 - examination of impact of section 56(2)(viib) or section 68 - Issue of Optionally Convertible Cumulative Preference Share (OPCCPS) - concept of limited scrutiny and complete scrutiny assessment - whether the Assessing Officer having failed to convert the limited scrutiny to a complete scrutiny, the assessment order would be rendered erroneous and prejudicial to the interest of revenue for the Pr.CIT to invoke his jurisdiction u/s 263 ? - HELD THAT:- In this case, the A.O. failed to examine the applicability of provision of section 56(2)(viib) and section 68 of the I.T.Act for the issue / allotment of OPCCPS would have a potential tax escapement of income far exceeding the amount prescribed in the CBDT Instructions. Therefore, we are of the view that this is a fit case for invoking the revisionary jurisdiction u/s 263 of the I.T.Act, especially in the light of the judgment of case of Sunrise Academy of Medical Specialities (India) (P) Ltd. [2018 (8) TMI 203 - KERALA HIGH COURT]. Even in case of limited scrutiny assessment, the A.O. is duty bound to make a prima facie inquiry as to whether there is any other items which requires examination and in the event, the potential escapement of income would have exceeded Rs.10 lakh and he ought to have sought the permission of the CIT / DIT to convert a `limited scrutiny assessment’ to a `complete scrutiny assessment’. Having failed to do so, the CIT, who was the authority to have granted permission for converting a `limited scrutiny assessment’ to a `complete scrutiny assessment’ is fully justified in invoking his revisionary jurisdiction u/s 263. CIT in his 263 order has categorically found that the A.O. is erroneous and prejudicial to the interests of revenue on account of failure of the A.O. to examine the applicability of section 56(2)(viia) or section 68 of the I.T.Act for the issue / allotment of OPCCPS. CIT had only set aside the assessment and directed the AO, to examine the valuation of OPCCPS. CIT need not in view of Explanation 2(a) to section 263 of the I.T.Act, come to a categorical finding that the valuation of OPCCPS is far exceeding the fair market value of shares. The A.O. has to examine these issues whether issue price of OPCCPS is exceeding FMV of shares, since he did had occasion to examine the valuation of OPCCPS. For the aforesaid reasoning, we uphold the CIT’s order passed u/s 263 of the I.T.Act as correct and in accordance with law. Decided against assessee.
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