TaxTMI 
TaxTMI 
2016 (5) TMI 1015
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....nt by holding that the assessment order dated 19.3.2014 made by the AO is erroneous and prejudicial to the interest of the Revenue. Further, the AO erred in making various observations and giving various findings without any corroborative evidence and / or contrary to such evidence and / or without any basis is reaching the above conclusions. The appellant prays that the order of the CIT under section 263 of the Act may kindly be quashed and the assessment order of the AO dated 19.3.2014 may be restored." 2. Briefly stated relevant facts are that the assessee is a Non-Banking Finance Institute (NBFI) and filed the return of income originally on 28.09.2011 declaring the total income of Rs. 9.9 lakhs (rounded off) under the normal provisions and Rs. 45 lakhs under the MAT provisions. In the return of income, assessee claimed long term capital gains of Rs. 20.27 Crs (rounded off) and the short term capital gains of Rs. 18.90 lakhs (rounded off). AO scrutinized the return of income and allowed the claims of the assessee. In the assessment, AO determined the taxes of Rs. 3,05,879/- under the normal provisions and Rs. 8,34,128/- under the MAT provisions. Under section 263 of the Act, P....
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....ased from M/s. Summit Securities Ltd, were valued at the previous owner invoking the provisions of section 49(1)(iii)(e) read with section 47(iv) of the Act. Assessee noted the capital gains against the capital loss and the said loss was claimed for carry forwarding benefits. The long term capital loss reported in the return of income worked out to Rs. 20,27,13,990/-. The short term capital gains is Rs. 18,89,591/-. After examining the above facts, the Principal CIT came to the conclusion that the AO did not conduct worthwhile inquiries which he should have done considering the related parties involved in these purchase and sale transactions. In addition, there is another issue of premium. In the earlier assessment year 2010-2011, assessee purchased certain shares for Rs. 45.31 Crs and did not make the payments in that year. The same shown as outstanding liability and the same is in connection with the beneficial interest in the RIFL. In connection with the repayment of the above outstanding liabilities, assessee devises method of repayment of the same by way of floating the rights issue with the premium of Rs. 715/- per share. It is the allegation of the Principal CIT that the AO ....
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....rovisions of section 49(1)(iii)(e) read with section 47(iv) of the Act. There is a detailed discussion about the manner in which the assessee acquired the said shares and how the cost in the previous owner‟s hands needs to be considered in this regard. Documents placed at pages 52, 53, 57, 58 of the PB supports the above. Bringing our attention to pages 62, 63, 65 and 66 of the PB, Ld Counsel for the assessee demonstrated that the same relates to the invoices showing the purchases of shares of CESC Ltd; SAREGAMA and PHILIPS CARBON BLACK LTD. These documents were available to the AO during the assessment proceedings. This is the case of the Ld Counsel for the assessee that AO issued questionnaire dated 6.2.2014 calling for relevant details on this specific issue. Ld Counsel for the assessee brought our attention to page 7 of the PB, which constitutes detailed submission dated 19.2.2014 and mentioned that the AO examined the issue of cost of shares in the hands of the assessee. 6. Regarding the allegation relating to the exorbitant premium of Rs. 715/- per share, Ld Counsel for the assessee brought our attention to page 10 of the PB and submitted that the assessee issued equit....
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....in connection with the sale of shares of listed companies ie CSES Ltd; SAREGAMA and PHILIPS CARBON BLACK LTD. Page 78 of the PB deals with the cost of the acquisition of the shares and page 79 of the PB deals with the sale price and the applicability of coordinate Bench decision in the case of Rupee Finance & Management (P) Ltd vs. ACIT, Mumbai (120 ITD 539). The said decision of the ITAT is relevant for the proposition that the AO is not justified in taxing the difference between the market price and the transfer price of the shares agreed between the parties under the head capital gains. Such addition as proposed by the CIT would be a case of addition of notional income if full value consideration is substituted with fair market value. In this regard, Ld Counsel for the assessee submitted that the officer cannot teach the businessman as to bow to conduct the business. Relying on the coordinate Bench decision in the case of Nariman Point Building Services and Trading Pvt Ltd (26 Taxmann.com 16), Ld Counsel for the assessee submitted that section 48 does not have any reference to the market value of the asset and it only refers to the full value consideration. The full value consid....
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....se and further he has not brought out any revenue loss specifically. In such case, Principal CIT cannot assume jurisdiction u/s 263 of the Act. In this regard, Ld Counsel for the assessee mentioned that the way the Principal CIT touched the issues and concluded without quantifying the revenue loss amounts to „hit and run‟ case. In this regard, Ld Counsel for the assessee submitted that the CIT is bound by law to quantify the revenue loss in his allegations. 10. Referring to a provision of Rs. 2.42 Crs in the context of sale of beneficial interest of RIFL benefit trust to M/s. Offshore India Ltd, Ld Counsel for the assessee submitted that the assessee explained the same vide his letter dated 19.2.2014 during the assessment proceedings and the said provision relates to the sundry debtors which captured the details of NPA. In this regard, Ld Counsel for the assessee explained that the assessee had receivables from M/s. Offishore India Ltd and the said receivables were assigned to Idea Tracom Pvt Ltd for Rs. 24.27 Crs. Relevant details are available on record to explain the provisions of NPA of Rs. 2.42 Crs. 11. Regarding the discrepancy on the value of shares qua entries....
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....-76 and 78 of the paper book. These pages deals with the evidence about the purchases, principle merger, shareholding patterns, copies of invoices showing evidence of purchase of shares etc. Written submission dated 12.3.2014 particularly dealt with the claim of loss reported on transfer of shares. Thus, Ld Counsel for the assessee‟s arguments revolve around the deep scrutiny of the AO on this issue of loss which does not permit the Principal CIT to invoke the provisions of section 263 of the Act. However, the case of the Revenue is that the AO has not gone to the deep into the various issues about the agencies of the shares, claim of amalgamation, applicability of the provisions of section 49(1) and 47(iv) of the Act etc. After considering the above divergent stands of both the parties and after considering the voluminous paper books available before us, we find it relevant to discuss this issue in the following paras. 15. To start with, we have perused the assessee‟s letter dated 12.3.2014 (page 68 of the PB) and the same refers to the assessee for the AY under consideration. this letter is written to the DCIT-6(2), concerned Assessing Officer of the assessee. Para 1....
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....of the transferred asset. In the case of bargain transactions and in the absence of any such material, the addition made by the AO by relying on the fair market value is unsustainable in law. Thus, in our view, the AO examined this issue of claim of loss of Rs. 20.23 Crs in the regular assessment proceedings made u/s 143(3) of the Act. Further, we have no confusion in our mind to mention here that AO has gone through the specific issues relating to the cost of acquisition of shares of CESC; SAREGAMA and PHILIPS CARBON BLACK LTD. The documents cited above would contain the invoice of the purchase and sale transactions confirm our decision. In any case, the fair market value related additions are unsustainable in law. CIT cannot recommend such unsustainable additions as the case of revenue loss while revising the order of the AO. CIT can assume jurisdiction only when the AO assumed the law erroneously ie incorrect assumption of law. CIT has not made out any such erroneous assumption of law in this case either in matters of cost of acquisition or in matters of sale transactions. We also dismiss the CIT / CIT-DR‟s vehement argument that AO failed to apply his mind and AO failed t....
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....r the assessee is that the said premium is to the benefit of the assessee and there is no loss of revenue to the assessee under consideration in respect of whom provisions of section 263 are invoked. Ld Counsel for the assessee also submitted that the share premium calculated by the assessee constitutes a „capital receipt‟ at the relevant point of time and the amended provision of section 56(2)(vii)(b) of the Act by the Finance Act, 2012 is operation w.e.f 1.4.2013 ie from AY 2013-14 only. 20. Per contra, the case of the Ld CIT-DR is that the AO failed to make any inquiry into the reasonableness of the premium. 21. On hearing both the parties on the application of mind by the AO into the reasonableness of the premium, we find nee to extracting certain relevant facts to this order and they are as under:- 22. Question Nos.9 and 10 of the questionnaire dated 6.2.2014 issued by the AO to the assessee are as under:- 23. The replies of the assessee to the said questions are placed in page 10 of the paper book vide its letter dated 19.2.2014 and the relevant answers are as follows:- 24. Further, we examined page 33 of the paper book and the same is scanned and placed as u....
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.... the amendment. Regarding the decision of the Tribunal in the case of Crompton Greaves Ltd (supra), Ld Counsel for the assessee submitted that the said decision was passed without considering the order of the Tribunal in the case of M/s. A.V. Industries vs. ACIT in ITA No. 3469/M/2010 (AY 2005-06), dated 6.11.2015. He brought our attention to the contents of para 11 of the said Tribunal‟s order (supra), wherein the Tribunal gave a categorical finding that the deemed provisions of Explanation-2 to section 263(1) are not applicable for the AY under consideration. It is obvious that this particular decision of the Coordinate Bench decision of the Tribunal was not considered in the decision of the Tribunal in the case of Crompton Greaves Ltd (supra). It is also the Ld Counsel‟s argument that the decision of the Tribunal in the case of Crompton Greaves Ltd (supra) did not deal with the issue ie whether the said amendment is in retrospective or prospective in nature. Ld Counsel for the assessee also mentioned that a favourable decision should be considered when contrary / divergent decisions exist on the issue. 27. On considering the arguments of both the parties as well as ....
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....) Improper inquiry and (iv) Perfunctory inquiry 35. Regarding „lack of inquiry‟, we are of the opinion that the same is relevant to case of „no inquiry at all‟ by AO in the regular assessment. No questions raised on the matter discussed by the CIT in revision proceedings. The same should not be used in cases of some or full inquiries into such matter. Regarding „inadequate inquiry‟, we are of the opinion that the expression „inadequacy‟ is not defined and it is a matter of subjective and relative item. What is the deciding item between the "adequacy" and "inadequacy", similar is the expression of "improper inquiry". What is the deciding live between proper and improper inquiries? These expressions need to be understood from the point of view of AO accepting erroneous claims of erroneous assumption of law (failure to follow law / precedents on the matter) or fact after gathering them. Finally, on the issue of "perfunctory inquiry" also, we find this expression means "an action to carry out without real interest / feeling / effort, cursory, desultory, routine duty, hasty, superficial, done quickly etc". The cases of the „perfunc....