2024 (6) TMI 653 - AT - Income Tax

ITAT quashes revision order under Section 263 for share premium valuation despite auditor's incorrect rule reference

The ITAT Delhi quashed a revision order u/s 263 regarding share premium valuation. The case involved valuation of unquoted shares where the auditor's ... Revision u/s 263 - share premium valuation - valuation report furnished by the Auditor revealed that it was based on the valuation of quoted shares provided u/Rule 11UA(1)(c), whereas this is case of valuation of unquoted shares u/R 11UA(1)(b), which attracted provision of Section 56(2)(b) and AO has failed to examine the issue during the course of assessment proceedings and passed a cryptic order. HELD THAT:- There appears to be substance in the contention of learned AR that during assessment proceedings the AO had raised all the relevant queries to which assessee had duly replied with all evidences. The valuation report is based on the correct method of valuation except for error in mentioning a wrong sub-section. It also comes up that in fact the investor is none other than the parent company M/s Home & Soul Infratech Private Limited. Thus, for the reason of lack of inquiry or that the assessment order is not elaborate and does not indicate all the facets of the inquiries made and the conclusion drawn, the assessment order cannot be termed as erroneous insofar as prejudicial to the interests of Revenue. The impugned order u/s 263 of the Act is quashed. Issues involved: Appeal against order u/s 263 of the Income-tax Act, 1961 regarding share premium valuation for assessment year 2018-19.Summary:1. The assessee's case was selected for scrutiny assessment on the issue of share premium. The Principal Commissioner of Income Tax, Noida, found the assessment order erroneous as the valuation report was based on the wrong rule for unquoted shares. Assessee challenged the order on various grounds. 2. During assessment proceedings u/s 143(3) of the Act, the Assessing Officer raised queries about shares issued by the assessee. The assessee provided necessary details and documents to establish the genuineness of the transactions and the valuation report.3. The Assessing Officer accepted the returned income after considering the replies and documents provided by the assessee. The valuation report, though mentioning the wrong sub-section, was based on the correct method of valuation for unquoted shares.4. The Tribunal found that the assessment order cannot be termed as erroneous or prejudicial to the interests of Revenue due to lack of inquiry or elaboration. The appeal was allowed, and the order u/s 263 of the Act was quashed.Separate Judgement: None.