2024 (4) TMI 17 - AT - Income Tax

Revision u/s 263 - issue of shares at premium - AO was directed to frame the assessment order afresh w.r.t. the applicability of section 56(viib)/68 of the Act after affording the assessee an opportunity of being heard - as per CIT AO has not verified justification of share premium with regard to the FMV and creditworthiness of the subscriber to whom the said shares/CCDs have been allotted at premium - HELD THAT - The assessment order u/s 143(3) does not have a word with regard to what was the nature of scrutiny assessment what query if any were raised and based upon what material the returned income was accepted. PCIT has thoroughly examined the transaction of issuance of the shares/convertible debentures and found that the AO has not examined any aspect of the genuineness of this investment in the assessee company. In fact in proceedings u/s 263 also none appeared for the assessee company. The record shows that in proceedings u/s 263/143(3) the AO had issued a notice on 31.03.2019 upon which the assessee company had furnished replies on e-filing portal and considering the same the assessment order u/s 143(3)/263 has been passed making the addition. There is no material before us to draw a conclusion that the valuation taken by the assessee company was correct and there is no error in discrediting the DCF method adopted by the assessee company. Thus there is no error in invoking the provisions of section 56(2)(viib) of the Act r.w.r. 11UA(1)(c)(b) of the IT Rules by the AO. The ground raised in the appeal have no substance. Assessee appeal is dismissed.

Summary

Issues:
The judgment involves an appeal against the order of the Assessing Officer under sections 263/143(3) of the Income Tax Act, 1961 concerning the issuance of Compulsorily Convertible Debentures and the valuation of share premium.

Issue 1 - Assessment Order under Section 263/143(3):
The assessee filed its return declaring an income of Rs. 1,49,470, which was assessed by the AO. The LD. PCIT found the assessment order to be erroneous and prejudicial to revenue due to inadequate verification of share premium justification. The AO was directed to reframe the assessment order regarding the applicability of section 56(viib)/68 of the Act.

Issue 2 - Grounds of Appeal:
The assessee appealed the fresh assessment order, challenging the addition of Rs. 1,60,00,000 to the income. The grounds of appeal included errors by the AO in making the addition and in invoking jurisdiction without providing the assessee an opportunity to be heard. The appeal also disputed the CIT's basis for invoking section 263 and the valuation of Compulsory Convertible Debentures.

Issue 3 - Lack of Appearance and Dismissal of Appeal:
During the proceedings, no one appeared on behalf of the assessee despite repeated notices. The LD. DR supported the orders of the tax authorities. The Tribunal noted the absence of the assessee and lack of material to support the valuation of the debentures. Consequently, the appeal was dismissed.

The Tribunal found that the assessment order lacked details on the nature of scrutiny assessment and the acceptance of the returned income. The LD. PCIT scrutinized the issuance of shares/debentures and the genuineness of investments in the company, noting the absence of representation for the assessee. The AO issued a notice, and based on the responses received, passed the assessment order. The Tribunal upheld the discrediting of the DCF method and the invocation of section 56(2)(viib) of the Act. Ultimately, the grounds raised in the appeal were deemed unsubstantiated, leading to the dismissal of the appeal.