TMI Blog2015 (12) TMI 1615X X X X Extracts X X X X X X X X Extracts X X X X ..... The assessee purchased the shares from the said Zensar, KEC, Spencer and Co Ltd and the transactions are considered by the AO genuine. Fact of verification of the share purchase transaction is very much on records. We find the AO is aware of and informed of the facts relating to the purchase price of the said shares, being lessor than that of the FMV. Considering the facts narrated by the Sri Mehta, we find that the AO conducted necessary enquiries in to various aspects of the said purchase transactions and opined to make addition on account of „excess premium‟ only and invoked the provisions of section 56 of the Act and not on account of the said share purchase transactions involving Zensar, KEC, Spencer and Co Ltd. Therefore, we find no error in the order of the AO, whether of legal or factual nature on that account.- Decided in favour of assessee. - I.T.A. No.2433/M/2015 - - - Dated:- 7-12-2015 - SHRI D. KARUNAKARA RAO, ACCOUNTANT MEMBER AND SHRI SANDEEP GOSAIN, JUDICIAL MEMBER For The Appellant : Appellant by : Shri Vijay Mehta For The Respondent : Shri Sambit Mishra, DR ORDER PER D. KARUNAKARA RAO, AM: This appeal filed by the assessee on ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Spencer Co 72.00 74.98 4 South Asia 100 100.00 3. Thus, the shares / preferential shares were purchased by assessee-company from the Universal, for consideration of ₹ 54,20,93,678/- against the market value of ₹ 91,53,34,248/-. Thus, the assessee acquired the above shares with the price less by ₹ 37.32 Crs (rounded of). 4. In the assessment order dated 22.3.2014, the AO issued various notices u/s 142 of the Act and the questionnaires / letters. Finally, he computed the assessed income at ₹ 11,37,53,720/- against the returned loss of ₹ 66,284/-. In the regular assessment, in connection with the said OFCDs converted into shares, AO determined the market value per share at ₹ 69/- against which, ₹ 90/- per share was the premium involved. Accordingly, AO considered the premium difference of ₹ 21/- per share (ie ₹ 90 ₹ 69) as excess premium charged by the assessee from Instant Holdings and the same is treated as income from other sources u/s 56(1) of the Act. Accordingly, AO made addition of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... round that CIT has different opinion the issues involved. 6. Eventually, the CIT set aside the order of the AO as per the discussion given in para 13 of the Revision Order. Relevant lines from the said Revision Order are extracted as under: 13 ..I, therefore, set aside the assessment order passed on 18.3.2013 and direct the AO to pass an assessment order afresh (de novo) after verifying the facts carefully in accordance with settled position of law. The AO should give reasonable opportunity of hearing to the assessee before passing the fresh assessment order. The Assessing Officer is required to examine the facts and the applicable law on facts discussed above at the time of fresh assessment without being prejudiced by the fact that assessment order has been set aside u/s 263 after taking into account submissions of the assessee. 7. Aggrieved with the above decision of the CIT, assessee filed the present appeal before the Tribunal questioning the assumption of jurisdiction u/s 263 of the Act. Arguments of Assessee s Counsel: 8. Before us, Ld counsel for the assessee made various submissions and argued vehemently for cancelling of the revision order of the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... essing Officer and addresses. 12. (i) in case of receipt of any share capital, please furnish the name, address, PAN, copy of accounts of the investor. 15. Details of investments along with the nature of return thereof and also state / explain the sources of funds for such investments along with cash flow statement. In respect of investments made in instruments capable of giving return exempt from taxation, please explain as to why the disallowance u/s 14A r.w.r 8D should not be made. 31. Furnish the name, Address, PAN and assessment details fo the persons who are beneficial owners of equity shares of the company holdig not less than 10% of the voting power at any time of the previous year. Please also furnish the ledger account of such persons in the books of the assessee company. Notice under sub-section [1] of section 142 of the Income Tax Act, 1961, dated 9.1.2014. 10. Furnish party wise details of investments made with copy of share certificates issued in respect of quoted and unquoted shares in the following format:- 11. Whether these shares are held in physical form or Demat Form? If they are held in Demat form provide your Demat A ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 11.3. Similarly, ₹ 172.89 pp per share is the FMV of Zensar as seen from page 35 of the assessee‟s paper book. 12. Thus, a nalysing each of the afore said question and answer and the statements / Annexures, Ld Counsel made out that the AO probed into the aspects of each of the related concerned, facts relating to the multiple share transfers by the assessee company repeated over the short span of time, facts relating to the purchase of shares by the assessee without adequate funds from UNIVERSAL for consideration lower than the market price, raising of the funds through the OFCDs route from the INSTANT and clearing of the liabilities of the assessee involving the Universal etc. 13. On the issue of prejudicial to the interest of revenue : Referring the revenue loss related allegation of the CIT, Ld Counsel submitted that the assessee purchased shares of Zensar, KEC and Spencer Co Ltd from UNIVERSAL for sum of ₹ 54.21 cr when the market rate of these shares is above ₹ 91.53 Cr. On this issue, Ld AR labored on the AO efforts of the AO in conducting proper verification. In this regard, he brought our attention to the contents of the page 17 of t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... deration and applied his mind to this or any other related issues pointed out by the Principle CIT. 15. Form vs Substance : on this issue, the case of the assessee is that the same is no ground for assumption of jurisdiction by the CIT u/s 263 of the Act. In this regard, Ld Counsel submitted that the CIT can assume jurisdiction validly only if there is erroneous assumption of fact or law, failure of the AO in application of mind to an issue and not formed any opinion in the matter etc. As per Ld Counsel, CIT is incorrect in issuing notice on the ground of illogical conclusion‟ or no proper verification etc. So long as (i) the conclusion are taken and (ii) verification is done by the AO on an issue, on the ground of illogicality is no sustainable ground for assumption of jurisdiction validly. Referring the expressions ie illogical conclusions‟ used in the revision order of the CIT, Mr Mehta interpreted the same by stating that the CIT admits to the fact of drawing conclusions on the issue by the AO. 16. Nexus of the both the issues: Further, referring to the addition of ₹ 11.34 cr made by the AO in the regular assessment on the ground of excess premium c ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... AO should have made addition on account of lower purchase consideration paid by the assessee to Universal‟. Earlier, assessee invested in preferential shares/shares of Zensar, KEC and Spencer‟ from Universal on credit basis. Otherwise, it is an undisputed fact that the assessee paid consideration of ₹ 54.20 cr against the market value of ₹ 91.53 cr (rounded off). Though it is unspecified, it is probably the case of the Revisionary Officer that the difference amount of ₹ 91.53 cr ₹ 54.20cr should have been the addition made by the AO in the assessment. But the moot point for examination by us relates to if the AO is unaware of this issue at the time of regular assessment proceedings? Having done the scrutiny of facts relating to both (i) excess premium issue and (ii) investment in shares with lower price tag, AO concluded to invoke the provisions of section 56 of the Act. Principle CIT terms this conclusion as illogical one the result of improper verification. 18. Principle CIT also alleges that it is a case of colourble device . For this, CIT analysed the frequent transfer of the shares/ownership of the assessee-company, investment in ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... OFCDs subscribed by the INSTANT etc. 22. Further, we find the CIT raised various issues alleging the AO‟s failure to conduct verification, AO‟s illogical conclusions on the excess premium‟ received from INSTANT leading to the addition of ₹ 11.34 cr instead of making addition on account of share purchase transactions from UNIVERSAL. Other miscellaneous issue raised by the CIT refers to form vs substance, frequent transfer of shares of the company transferring the ownership of the assessee, purchase of the shares without having own funds from Universal etc. However, we find that the Pri CIT failed to demonstrate if any, of these decisions are prejudicial to the interest of revenue in the case of this assessee. 23. On assimilating all the relevant facts relating to the issues, we find that allegations of the CIT are not supported by any evidences. We find the shares of the assessee are transferred hurriedly and however, there is no violation of any porivisons of any statute. We find there is no ground for allegation of colouble device when there is no tax loss in the case of the assessee. Therefore, we shall take up the legal issue relating to the validi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of revenue by the CIT is the requirement of the revisionary order of the CIT. Such loss of revenue should be obviously assesseespecific ie with reference to the assessee in question and not with reference to the other party of the transaction or third party. Regarding application of mind of the AO, it is a decided issue that the assessment proceedings must reflect that there are enquiries undertaken by the AO. It is not the requirement that the order must speak on such enquiries. II. Decision on the Allegations of the Principal CIT: 26. AO s failure to conduct verification and enquiry : On verification of the notices and u/s 142, the questionnaires and replied thereto, we find that the AO probed into the aspects of each of the related concerned, facts relating to the multiple share transfers by the assessee company repeated over the short span of time, facts relating to the purchase of shares by the assessee with no adequate funds from Universal for consideration lower than the market price, raising of the funds through the OFCDs route from the INSTANT and clearing of the liabilities to the Universal etc. We also examined and the following annexures reflect the fact of ve ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... assumption of jurisdiction validly. Referring the expressions ie illogical conclusions‟ used in the revision order of the CIT, Mr Mehta interpreted the same by stating that the CIT admits to the fact of drawing conclusions on the issue by the AO. We found point in the said argument of the Ld Counsel. d. Allegation of Loss of Revenue in the light of the expressions prejudicial to the interest of revenue : Similarly, various reservations the CIT mentioned in his order includes the investments are made at a price lower than their FMV at the relevant point of time and it is to his advantage. Actually, it is a case of revenue gain to the assessee and loss to the sellor company. Those companies should have been ideally revised by the relevant CIT. Ld DR is unable to justify the failure of the revenue in invoking the provisions of section 263 in the case of Universal . We are certain of the fact that, as vehementaly argued by Ld AR for the assessee, we agree with the argument that there is no loss of revenue. It is likely that AO has not made addition on this account in the regular assessment In that case where is loss of revenue in these transactions.? after examin ..... X X X X Extracts X X X X X X X X Extracts X X X X
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