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of <h1>Assessment order upheld, PCIT's jurisdiction invalid, assessee's appeal allowed.</h1> <h3>M/s. Sunray Cotspin (P) Ltd. Versus Pr. CIT Gurgaon</h3> M/s. Sunray Cotspin (P) Ltd. Versus Pr. CIT Gurgaon - [2020] 79 ITR (Trib) 193 (ITAT [Del]) Issues Involved:1. Assumption of jurisdiction under Section 263 of the Income-tax Act, 1961.2. Examination of discrepancies in the assessment records.3. Verification of share premium and creditworthiness of shareholders.4. Adequacy of inquiry conducted by the Assessing Officer.Detailed Analysis:1. Assumption of Jurisdiction under Section 263:The assessee challenged the assumption of jurisdiction under Section 263 by the Principal Commissioner of Income Tax (PCIT), Gurgaon, for the Assessment Year (A.Y.) 2014-15. The PCIT issued a notice stating that the assessment framed under Section 143(3) was erroneous and prejudicial to the interest of the revenue due to discrepancies noticed in the assessment records.2. Examination of Discrepancies in Assessment Records:The PCIT noted that the company issued shares at a premium and received a substantial share premium amounting to Rs. 3,66,66,000/-. It was observed that the Assessing Officer (AO) did not verify the Fair Market Value (FMV) calculation as per Rule 11U and 11UA, nor did he verify the creditworthiness of the shareholders or the nature and source of the share application money and share premium.3. Verification of Share Premium and Creditworthiness:The PCIT pointed out that the AO failed to conduct proper inquiries regarding the substantial premium paid on shares by individuals and did not verify the identity and creditworthiness of the shareholders. The PCIT concluded that the AO's order was passed without application of mind and was thus erroneous and prejudicial to the interest of the revenue.4. Adequacy of Inquiry Conducted by the Assessing Officer:The assessee argued that the AO made specific inquiries during the assessment proceedings, and the assessee provided all necessary documents, including the balance sheet, share application money details, and a certificate from a Chartered Accountant justifying the valuation of shares. The Tribunal noted that the AO issued a notice under Section 142(1) specifically querying the details of share premium, indicating that the AO conducted inquiries on the issue for which the return was selected for scrutiny.The Tribunal observed that the share application money was received in the previous year (A.Y. 2013-14) and not in the year under consideration (A.Y. 2014-15). The AO's inquiries and the assessee's responses were found to be satisfactory. The Tribunal emphasized that the AO's order cannot be considered erroneous merely because it did not elaborate on the inquiries conducted.Conclusion:The Tribunal concluded that the AO conducted adequate inquiries and the assessment order was not erroneous or prejudicial to the interest of the revenue. The PCIT's assumption of jurisdiction under Section 263 was deemed unjustified. The Tribunal set aside the PCIT's order and restored the AO's assessment order dated 18.08.2016.Outcome:The appeal of the assessee was allowed, and the order of the PCIT was set aside. The assessment order framed under Section 143(3) was restored.
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