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TMI Blog2021 (12) TMI 1072X X X X Extracts X X X X X X X X Extracts X X X X ..... u/s 143(3) on 29.08.2017 was erroneous and prejudicial to the interest of the Revenue as according to him during the year, assessee had made investment in unlisted equity shares of closely held companies and issue of fair market value of investment as per Section 56(2)(viia) of the Act was not examined by the AO for determination of the fair market value of share. He accordingly issued show-cause notice on 18.05.2018 asking the assessee to show-cause as to why the order u/s 263 of the Act not be passed. In reply to the show-cause notice, assessee made the submissions which were not found acceptable to PCIT. PCIT thereafter vide order dated 31.03.2021 passed u/s 263 of the Act set aside the order dtd 29.08.2017 passed by AO u/s 143(3) of the Act and directed the AO to make a fresh assessment after taking into consideration the observations of PCIT in the order. Aggrieved by the order of PCIT, assessee is now in appeal and has raised the following grounds: 1. "The Ld. Pr. CIT has assumed power u/s 263 of the Act holding the assessment order dated 29.08.2017 as erroneous and prejudicial to the interest of revenue on the ground that no independent enquiry or examination of the detail ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ed for limited scrutiny was that during the year assessee had made investment in unlisted equity shares. He submitted that during the year assessee had made Investment in 2500 equity shares of Mukund Coalfields Pvt Ltd @ Rs. 10 per share. (Investment Rs. 25,000/-) and Investment in 7,70,000 equity shares of Indian Steel & Power Pvt Ltd @ Rs. 10 per share (Investment Rs. 77,00,000/-). Learned AR thereafter pointed to the questionnaire issued by the AO along with the notice u/s 142(1) dated 18.01.2017 (which is placed at page 41 & 42 of the paper book) wherein the assessee was asked to give the details with respect to the investments made in unlisted equity shares. He submitted that in response to notice and during the course of various hearings before the AO, assessee had furnished requisite details of the investments and had also furnished the copies of the Memorandum of Associations of the Company & broker note for purchase of shares. He also pointed to the reply of the assessee dated 25.08.2017 which is placed at Page 47 of the paper book wherein assessee had also given the calculation of the book value of the shares of Indian Steel & Power Pvt. Ltd. at Rs. 10.69 per share. He fu ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... intrinsically connected with the issue of investment in unlisted equities and since it was not examined by AO, PCIT invoked the provisions of Section 263 of the Act. When the matter was carried before the Hon'ble Tribunal, the Hon'ble Bench held that the AO was not empowered to examine the above issue in the limited scrutiny based on the given reason unless the scope of enquiry was enlarged by adopting the due procedure to convert the limited scrutiny to complete scrutiny. The Hon'ble Bench relying on the decision of jurisdictional Delhi High Court in PCIT vs. Brahma Center Development P. Ltd. (ITA No. 116 & 118/2021, order dated 05.07.2021) held that PCIT was not entitled to expand the scope of enquiry beyond the limitation on the AO at the time of passing of order under revision. He pointed to the copy of the aforesaid order placed in the paper book. 8. He thereafter submitted that according to PCIT the investment of Rs. 77,00,000/- made by the assessee in the Shares of Indian Steel & Power Pvt. Ltd. was at the value less than the Fair Market Value requiring the addition of the difference in purchase cost and fair market value u/s 56(2)(viia) of the Act. He submitted that accord ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... iving the assessee an opportunity of being heard and after making or causing to be made such inquiry as he deems necessary, pass such order thereon as the circumstances of the case justify, including an order enhancing or modifying the assessment, or cancelling the assessment and directing a fresh assessment." 12. The reading of the above provision makes it very clear that the power of suo motu revision u/s 263(1) is in the nature of supervisory jurisdiction and the same can be exercised only if the circumstances specified therein exist. Two circumstances must exist to enable the Commissioner to exercise power of revision u/s 263, namely (i) the order is erroneous (ii) by virtue of being erroneous, prejudice has been caused to the interests of the Revenue. 13. Hon'ble Apex Court in the case of Malabar Industrial Co., Ltd., Vs CIT reported in (2000) 243 ITR 83 (SC) has held that PCIT has to be satisfied of twin conditions, namely, (i) the order of the AO sought to be revised is erroneous; and (ii) it is prejudicial to the interests of the Revenue. If one of them is absent-if the order of the ITO is erroneous but is not prejudicial to the Revenue or if it is not erroneous but is pr ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... f the Commissioner is not satisfied with the conclusion arrived by the Assessing Officer. The order can be brought within the purview of an erroneous order only if it involves an error by deviating from law or upon erroneous application of the legal principle. It is a settled law that the power of revision can be exercised only where no inquiry as required under the law is done and it is not open to enquire in cases of inadequate inquiry. In the present case, as noted above, the AO had raised various queries and the same were also replied by the Assessee. In such a situation it cannot be said that there was lack of inquiry from the end of AO. 15. We find that the Co-ordinate Bench of Tribunal in the case of M/S Pawansut Media Services Pvt. Ltd. (supra) on identical facts and relying on the decision of Hon'ble Delhi High Court in the case of Pr. CIT vs. Brahma Center Development P. Ltd. in ITA Nos. 116 & 118/2021 dated 05.07.2021 held that PCIT was not justified in assuming the jurisdiction. 16. As far as the invocation of Explanation 2 to Section 263 by PCIT in the present case is concerned, we are of the view that only in a very gross case of inadequacy in inquiry or where inqui ..... X X X X Extracts X X X X X X X X Extracts X X X X
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