TMI Blog2022 (7) TMI 991X X X X Extracts X X X X X X X X Extracts X X X X ..... sed for directing a fuller enquiry to find out if the view taken is erroneous. This power of revision can be exercised only where no enquiry, as required under the law, is done. It is not open to enquire in case of inadequate inquiry. In the present case Assessing Officer observed that the fair market value determined by the Chartered Accountant is Rs.90.34 whereas the assessee issued for a price of Rs.91/- each. The excess amount charged by the assessee-company was added by the Assessing Officer by invoking the provisions of section 56(2)(viib). We come to the conclusion that the transaction of issuing 76923 equity shares at Rs.91/- per share (face value of Rs.10/- and share premium of Rs.81/-) issued by the assesseecompany to the two shareholder companies namely Zigzag Vanijya Private Limited (43,956 equity shares) and Ganadipati Estate Private Limited (32,967 equity shares) has been examined in detail by the Assessing Officer and an addition was made on this issue. It is neither a case of no enquiry or lack of enquiry . In our considered view, the Assessing Officer has conducted sufficient inquiry by calling all necessary details and information and accepted the genu ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... examining and critically legally analyzing the facts of the appellant s case and the written submissions filed by the appellant along with documentary evidences in support thereof. Thus, the act of the Ld. PCIT c considering the assessment order as erroneous and prejudicial to the interest of the revenue is nothing but the change of opinion on the same set of facts leading 1 unlawful revision of a lawfully concluded assessment u/s 143(3) of the Act. (4) For that the Ld. PCIT erred in reappraising the facts of the appellant vide proceeding initiated u/s 263 of the Act, which, however, were duly examined, discussed and scrutinized by the AO while framing the assessment order u/s 143(3) of the Act and whereas such reappraisal of the same facts is beyond the jurisdiction of Section 26 the Act. (5) For that the Ld. PCIT erred factually in holding the appellant s case as the case of lack of independent and adequate enquiry by the AO and that the order u/s 143(3) of the Act was passed by the AO without making inquiries and verifications which should have been made, contrary to the fact that a detailed questionnaire along with notice u/s 142(1) of the Act was issued by the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... countant and came to the conclusion that the addition of Rs.50,769/- is called for under the provisions of section 56(2)(viib) of the Act for the excess share issue price received by the assessee and assessed the loss at Rs.78,727/-. 4. Subsequently Ld. Principal Commissioner of Income Tax (in short PCIT ) examined the assessment records and invoked the powers under section 263 of the Act by observing that the Assessing Officer has not carried out the detailed investigation/verification /independent inquiry regarding identity, creditworthiness of the shareholders and the genuineness of the transactions of receiving share capital amounting to Rs.69,99,993/- (by way of issuing 76923 equity shares at Rs.91/- per share) and issued following show-cause notice dated 20.12.2019:- 2.1. The A.O. passed the order without carrying out detailed investigation/ verification/ independent enquiry regarding identity, creditworthiness of the shareholders also the genuineness of transactions relating to share capital amounting to Rs. 69,99,993/- (76923 X Rs. 91/-) that was intended to be carried out and merely accepted the submission of the assessee in this regard. 2.2. That A.O has ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... n of law, a detailed inquiry ought to have been made by the Assessing Officer. Accordingly assessment order dated 14.09.2017 was set aside denovo by the ld. PCIT observing as follows:- 8. I have carefully considered and perused the material available on record and submission made during this proceedings and found that the issue pointed out in the show-cause needs verification as merely accepting submission without calling for logically relevant material/evidences in order to have an overview of totality of facts and circumstances during the course of assessment proceedings, the A.O. failed to examine the above referred issue, rendering the assessment order erroneous on the ground of lack of enquiry. After having considered the position of law and facts and circumstances of the instant case, I am of the considered opinion that the assessment order passed by the A.O. is erroneous in so far as it is prejudicial to the interest of revenue in accordance with the Explanation 2 of section 263 (1) of the Act on the ground of lack of enquiry. Accordingly, the assessment dated 14.09.2017 passed u/s 143(3) is set aside denovo on specific issue as outlined in above para with a direction t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the shareholders and genuineness of the transactions. 10. We have heard the arguments of both the sides and also perused the relevant material available on record. In the impugned order under section 263 of the Act, the only issue raised in the show-cause notice is that the Assessing Officer has not conducted detailed inquiry about the transactions of issuing 76923 equity shares of face value at Rs.10/- each and share premium of Rs.81/- each thereby receiving total share capital and share premium at Rs.69,99,993/-. In the impugned order, ld. PCIT directed the Assessing Officer to pass denovo assessment order on the specific issue as outlined in the impugned order. With the assistance of ld. representative, we have gone through the records. Section 263 has a direct bearing on the controversy, therefore, it is pertinent to take note of this section. It reads as under:- 263(1) The Commissioner may call for and examine the record of any proceeding under this Act, and if he considers that any order passed therein by the Assessing Officer is erroneous in so far as it is prejudicial to the interest of the revenue, he may, after giving the assessee an opportunity of being heard an ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... or injunction of any court shall be excluded. 2. On a bare perusal of the sub section-1 would reveal that powers of revision granted by section 263 to the learned Commissioner have four compartments. In the first place, the learned Commissioner may call for and examine the records of any proceedings under this Act. For calling of the record and examination, the learned Commissioner was not required to show any reason. It is a part of his administrative control to call for the records and examine them. The second feature would come when he will judge an order passed by an Assessing Officer on culmination of any proceedings or during the pendency of those proceedings. On an analysis of the record and of the order passed by the Assessing Officer, he formed an opinion that such an order is erroneous in so far as it is prejudicial to the interests of the Revenue. By this stage the learned Commissioner was not required the assistance of the assessee. Thereafter the third stage would come. The learned Commissioner would issue a show cause notice pointing out the reasons for the formation of his belief that action u/s 263 is required on a particular order of the Assessing Officer. At ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Hon ble Apex Court in the case of CIT vs. Max India Limited as reported in 295 ITR 0282 has held that: 2. At this stage we may clarify that under para 10 of the judgment in the case of Malabar Industrial Co. Ltd. (supra) this Court has taken the view that the phrase prejudicial to the interest of the Revenue under s. 263 has to be read in conjunction with the expression erroneous order passed by the AO. Every loss of revenue as a consequence of an order of the AO cannot be treated as prejudicial to the interest of the Revenue. For example, when the ITO adopted one of the courses permissible in law and it has resulted in loss of revenue; or where two views are possible and the ITO has taken one view with which the CIT does not agree, it cannot be treated as an erroneous order prejudicial to the interest of the Revenue, unless the view taken by the ITO is unsustainable in law. 5. Hon'ble Madhya Pradesh High court in the case of CIT vs. Associated Food Products (P) Ltd as reported in 280 ITR 0377 has held that: 10. In view of the aforesaid pronouncement of law and taking into consideration the language employed under s. 263 of the Act, it is clear as crystal th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ision can arise, nor can revisional power be exercised for directing a fuller enquiry to find out if the view taken is erroneous. This power of revision can be exercised only where no enquiry, as required under the law, is done. It is not open to enquire in case of inadequate inquiry. Our view is fortified by the judgment of Hon'ble High Court of Bombay in the case of CIT vs. Nirav Modi, [2016] 71 taxmann.com 272 (Bombay). 7. This view is further supported by the decision of the Hon'ble Gujarat High Court in the case of Shri Prakash Bhagchand Khatri in Tax Appeal No. 177 with Tax Appeal No.178 of 2016, wherein the Hon'ble Gujarat High Court was seized with the following substantial question of law:- Whether the Tribunal is right in law and on facts in upholding the order passed by the CIT under section 263 of the Act on merits and still storing the issue of allowability of deduction under section 54 of the Act to the file of Assessing Officer even though the working of allowability of deduction under section 54F is available in the order under section 263 which is not disputed by the assessee before ITAT. 8. We find that the Hon'ble Delhi High Court in ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ved in the order passed by him that the assessee has not filed certain documents on the record at the time of assessment. Assuming it to be so, in our opinion, this does not justify the conclusion arrived at by the CIT that the AO had shirked his responsibility of examining and investigating the case. More so, in view of the fact that the assessee explained that the capital investment made by the partners, which had been called into question by the CIT was duly reflected in the respective assessments of the partners who were I.T. assessees and the unsecured loan taken from M/s Stutee Chit Finance (P) Ltd. was duly reflected in the assessment order of the said chit fund which was also an assessee. 64. Since in the instant case the A.O. after considering the various submissions made by the assessee from time to time and has taken a possible view, therefore, merely because the DIT does not agree with the opinion of the A.O., he cannot invoke the provisions of section 263 to substitute his own opinion. It has further been held in several decisions that when the A.O. has made enquiry to his satisfaction and it is not a case of no enquiry and the DIT/CIT wants that the case coul ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... uring the course of assessment proceedings on the relevant issues and the assessee has given detailed explanation by a letter in writing and the AO allows the claim on being satisfied with the explanation of the assessee, the decision of the AO cannot be held to be erroneous simply because in his order he does not make an elaborate discussion in that regard. 10. Apart from above stated broader principles, one more principle needs to be added in view of the judgment of Hon ble Delhi High Court in the case of ITO vs. D.G. Housing Projects Ltd. [2012] 343 ITR 329 (Delhi) that the ld. CIT has to examine and verify the issue himself and give a finding on merits and form an opinion on merits that the order passed by the AO is erroneous and prejudicial to the interest of the Revenue. Relevant extract is reproduced below: In the present case, the findings recorded by the Tribunal are correct as the CIT has not gone into and has not given any reason for observing that the order passed by the Assessing Officer was erroneous. The finding recorded by the CIT is that order passed by the Assessing Officer may be erroneous . The CIT had doubts about the valuation and sale consideratio ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... f the shareholders and also to furnish market value of the shares applying the method as per the provisions of Rules 11UA of the Income Tax Rules, 1962. (c) Assessing Officer also issued notice under section 133(6) of the Act to the alleged shareholder companies on 23.08.2017 and the same were replied by few shareholders through letter dated 05.09.2017 directly to the Assessing Officer. (d) On 22.08.2017, the assessee filed the reply to the Assessing Officer as called for in the notice issued under section 142(1) of the Act. Specific reply was given to Question No. 4 with complete details of number of equity shares issued, share premium charged, details of shareholders, income tax return and PAN details of the shareholders, which are namely Zigzag Vanijya Private Limited and Ganadipati Estate Private Limited. A certificate of Chartered Accountant was also filed in support of the fair market value of the equity shares issued by the assessee-company. 12. After considering all the above details, which were filed during the course of assessment proceedings, ld. Assessing Officer observed that the fair market value determined by the Chartered Accountant is Rs.90.34 whereas the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... issued by the assesseecompany to the two shareholder companies namely Zigzag Vanijya Private Limited (43,956 equity shares) and Ganadipati Estate Private Limited (32,967 equity shares) has been examined in detail by the Assessing Officer and an addition was made on this issue. It is neither a case of no enquiry or lack of enquiry . In our considered view, the Assessing Officer has conducted sufficient inquiry by calling all necessary details and information and accepted the genuineness of the said transactions after being satisfied with the identity, creditworthiness and genuineness of the shareholders and examining fair market value of the equity shares issued. Under these given facts and circumstances wherein neither the order of the Assessing Officer is erroneous nor it is prejudicial to the interest of the revenue, there remains no scope for ld. PCIT to invoke the provision of section 263 of the Act. We accordingly quash the impugned order under section 263 of the Act and restore the assessment order passed by the Assessing Officer under section 143(3) of the Act dated 14.09.2017. Thus all the grounds raised by the assessee are allowed as per terms indicated hereinabove. ..... X X X X Extracts X X X X X X X X Extracts X X X X
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