AI Drafter 
TaxTMI 
TaxTMI 
2022 (7) TMI 991
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.... and in law, the Ld. PCIT grossly erred in not appreciating that the twin conditions precedent for invoking Section 263, namely the impugned assessment order must be erroneous and that error must be prejudicial to the interest of the revenue, were not fulfilled in the appellant's case. Further, that the AO either examined the issue at the original assessment stage or his view was one of the possible views and therefore there was no error in the impugned assessment order so as to justify action u/s 263 of the Act. Under the circumstances, the very assumption of power u/s 263 of the Act is unjustified and bad in law and the order passed in pursuance thereof is unjustified and bad in law and the same deserves to be quashed. (3) That on the facts and circumstances of the case and in law, the Ld. PCIT has erred in not appreciating the fact that the AO had passed the assessment order u/s 143(3) of the Act, after verifying, 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....
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.... been duly examined, discussed and scrutinized by the AO while framing the assessment order u/s 143(3) of the Act. 3. Brief facts of the case are that the assessee is a Private Limited Company engaged in the business of investment in shares, Mutual Fund and financing. The return of income was electronically filed by the assessee on 26.09.2015 for the assessment year 2015-16 declaring total loss at Rs.1,29,496/- The case was selected for scrutiny. Accordingly notices under section 143(2) of the Act dated 23.06.2016 and under section 142(1) dated 20.03.2017 were served upon the assessee. The Assessing Officer during the course of assessment proceedings examined the transactions carried out by the assessee-company for issuing 76,923 numbers of equity shares of Rs.10/- each alongwith share premium of Rs.81/- per share. The Assessing Officer carried out the necessary examination of documents as well as certificate issued by the Chartered Accountant 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. Subseque....
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....2 of the Section 263(1) of the Act as the order is passed without making inquiries or verifications which should have been made on these issues of short term loans and advances." 5. During the revisionary proceedings under section 263 of the Act, the assessee filed detailed submissions exhibiting that complete inquiry has been conducted by the ld. Assessing Officer with respect to the alleged issue of share capital. Reliance placed on plethora of judgments wherein it has been held that where the issue raised in show-cause notices has been examined by the Assessing Officer in the light of the relevant facts and circumstances and taken a view permissible under the law, ld. PCIT/CIT cannot assume jurisdiction under section 263 of the Act. 6. However, Ld. PCIT was not satisfied with the submissions made by the assessee. He was of the view that when the assessment order passed by the Assessing Officer is on incorrect assumption of facts and incorrect application 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 considere....
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....CIT Vs. Anil Kumar Sharma, 335 ITR 83 (Del); (iv) CIT Vs. Vikas Polymers, 236 CTR 476/194 Taxman 57; (v) Hari Iron Trading Co. Vs. CIT, 263 ITR 437 (P&H); (vi) Malabar Industrial Co, Ltd. Vs. CIT, 243 ITR 83 (S.C.); (vii) CIT Vs, Hindustan Coca Cola Beverages (P) Ltd. 331 ITR 192(Del.); (viii) CIT Vs. International Travel House Ltd., 194 Taxman 324; (ix) CIT Vs. DLF Power Ltd., 329 ITR 289(Del.); (x) CIT Vs. Eicher Ltd., 294 ITR 310 (De!.); (xi) CIT Vs. Ashish Rajpal, 320 ITR 674 (Del.); (xii) CIT Vs. Rohit Anand, 327 ITR 445 (Del); (xiii)CIT Vs. Gopal Purohit, 228 CTR 582(Bom.); (xiv) CIT Vs. PNB Finance & Industries Ltd, 236 CTR 1 (Delhi)". 9. Per contra, ld. D.R. vehemently argued supporting the detailed finding of the ld. PCIT and the decisions relied therein. It is also contended that the Assessing Officer should have increased the scope of inquiry so as to examine the identity and creditworthiness of 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 impu....
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....l filed on or before or after the 1st day of June, 1988, the powers of the Commissioner under this sub-section shall extend and shall be deemed always to have extended to such matters as had not been considered and decided in such appeal. (2) No order shall be made under sub-section (1) after the expiry of two years from the end of the financial year in which the order sought to be revised was passed. (3) Notwithstanding anything contained in sub-section (2), an order in revision under this section may be passed at any time in the case of an order which has been passed in consequence of, or to give effect to, any finding or direction contained in an order of the Appellate Tribunal, National Tax Tribunal, the High Court or the Supreme Court. Explanation- In computing the period of limitation for the purposes of sub-section (2), the time taken in giving an opportunity to the assessee to be reheard under the proviso to section 129 and any period during which any proceeding under this section is stayed by an order 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....
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....he phrase 'prejudicial to the interests of the revenue' has to be read in conjunction with an erroneous order passed by the Assessing Officer. Every loss of revenue as a consequence of an order of the Assessing Officer cannot be treated as prejudicial to the interests of the revenue, for example, when an 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 Commissioner does not agree, it cannot be treated as an erroneous order prejudicial to the interests of the revenue unless the view taken by the ITO is unsustainable in law. It has been held by this Court that where a sum not earned by a person is assessed as income in his hands on his so offering, the order passed by the Assessing Officer accepting the same as such will be erroneous and prejudicial to the interests of the revenue - Rampyari Devi Saraogi v. CIT [1968] 67 ITR 84 (SC) and in Smt. Tara Devi Aggarwal v. CIT [1973] 88 ITR 323 (SC)".[Emphasis Supplied] 4. 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 ....
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....was the sequitur or consequence of such order qua prejudicial to the interest of the Revenue should have been focused upon. That having not been done, in our considered opinion, exercise of jurisdiction under s. 263 of the Act is totally erroneous and cannot withstand scrutiny. Hence, the Tribunal has correctly unsettled and dislodged the order of the CIT. [Emphasis supplied] 6. In the light of the provisions of section 263 of the Act and a settled position of law, powers u/s 263 of the Act can be exercised by the Pr. Commissioner/Commissioner on satisfaction of twin conditions, i.e., the assessment order should be erroneous and also prejudicial to the interest of the Revenue. By 'erroneous' is meant contrary to law. Thus, this power cannot be exercised unless the Commissioner is able to establish that the order of the Assessing Officer is erroneous and prejudicial to the interest of the Revenue. Thus, where there are two possible views and the Assessing Officer has taken one of the possible views, no action to exercise powers of revision can arise, nor can revisional power be exercised for directing a fuller enquiry to find out if the view taken is erroneous. This power....
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....he case justify. The twin requirements of the section are manifestly for a purpose. Merely because the CIT considers on examination of the record that the order has been erroneously passed so as to prejudice the interest of the Revenue will not suffice. The assessee must be called, his explanation sought for and examined by the CIT and thereafter if the CIT still feels that the order is erroneous and prejudicial to the interest of the Revenue, the CIT may pass revisional orders. If, on the other hand, the CIT is satisfied, after hearing the assessee, that the orders are not erroneous and prejudicial to the interest of the Revenue, he may choose not to exercise his power of revision. This is for the reason that if a query is raised during the course of scrutiny by the AO, which was answered to the satisfaction of the AO, but neither the query nor the answer were reflected in the assessment order, this would not by itself lead to the conclusion that the order of the AO called for interference and revision. In the instant case, for example, the CIT has observed in the order passed by him that the assessee has not filed certain documents on the record at the time of assessment. Assumin....
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....ue cannot be treated as prejudicial to the interests of the Revenue and if the AO has adopted one of the courses permissible under law or where two views are possible and the AO has taken one view with which the CIT does not agree. If cannot be treated as an erroneous order, unless the view taken by the AO is unsustainable under law (vi) If while making the assessment, the AO examines the accounts, makes enquiries, applies his mind to the facts and circumstances of the case and determine the income, the CIT, while exercising his power under s 263 is not permitted to substitute his estimate of income in place of the income estimated by the AO. (vii) The AO exercises quasi-judicial power vested in his and if he exercises such power in accordance with law and arrive at a conclusion, such conclusion cannot be termed to be erroneous simply because the CIT does not fee stratified with the conclusion. (viii) The CIT, before exercising his jurisdiction under s. 263 must have material on record to arrive at a satisfaction. (ix) If the AO has made enquiries during the course of assessment proceedings on the relevant issues and the assessee has given detail....
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....Revenue. In the second set of cases, CIT cannot direct the Assessing Officer to conduct further enquiry to verify and find out whether the order passed is erroneous or not." 11. After going through the settled judicial precedence laid down by the Hon'ble Courts with regard to the provision of section 263 of the Act and its applicability, on examination of the facts of the case, we find the following facts have emerged from the available records:- (a) On selection of the assessee's case for scrutiny, notice under section 142(1) dated 04.08.2017 issued and through Point No. 4, the assessee was specifically required to file financial statement, details of receiving large share premium during the year and to furnish party-wise details of share premium providing details of names, addresses, PAN, incometax Ward where shareholders are assessed, number of shares subscribed, face-value, share premium and full particulars of receipts. (b) In the notice under section 142(1) of the Act, the Assessing Officer also asked the assessee to prove the identity, creditworthiness and genuineness of the shareholders and also to furnish market value of the shares applying the method ....
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......66/- per share totaling to Rs.(76923 x .66) or Rs. 50,769/- would not be added to the total income under the head 'Income from Other Sources' . In response, the assessee stated that they have taken fare market value of its share at rounded price i.e. Rs.91/- instead of Rs. 90.34 which is ignorable. But the excess issue price is not ignorable for determining the value of unquoted equity shares as per provision of Sec. 56(2)(viib)of the I.T. Act read with Rule 11UA and hence excess issue price of the shares would be the income of the assessee. Therefore, Rs. 50,769/- being the excess issue price over the fair market value of shares is treated as income of the assessee and added to the total income under the head 'Income from Other Sources' as per provision of Sec. 56(2)(viib) of the I.T. Act, 1961". 13. Therefore, in view of the above discussions, facts and circumstances and respectfully following the settled judicial jurisprudence referred hereinabove, 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 compan....