TaxTMI 
TaxTMI 
2022 (5) TMI 1496
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....al Commissioner of Income Tax ("Learned PCIT") under Section 263 of the Income Tax Act, 1961 ("'Act") is bad in law and void ab-initio. 2. That the order of the learned PCIT is bad in law, being based onsurmises and conjectures without any finding of fact as to how theorder passed under section 143(3) of the Act was erroneous orprejudicial to the interest of the revenue. Jurisdictional grounds / on merits 1. The learned PCIT erred in revising u/s 263 r.w Explanation 2 the assessment order passed us. 143(3) dt 29/12/2017 with respect to the issue of valuation of shares/charging of premium & depreciation on operation and management rights without appreciating that the assessment order passed by the Assessing Officer was neither erroneous nor prejudicial to the interest of the revenue and hence the order of revision is bad in law. 2. The learned PCIT failed to appreciate that the Assessing Officer has issued specific questions in the course of assessment proceedings in respect of valuation of shares/charging of premium depreciation on operation and management rights during the course of assessment proceedings and the assessee had furnished all details pertaining to the....
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....ights the Assessing Officer had adopted a possible view which view was not unsustainable in law and thus the assessment order cannot be termed as erroneous and prejudicial to the interest of the revenue and hence the order of revision is bad in law. 8. The appellant craves leave to add, amend, alter or delete any of the above grounds of appeal." 3. Briefly stated, facts of the case are that the assessee-company was engaged in the business of operation and management of hospitals and for assessment year under consideration i.e. AY 2015- 16 , filed its return of income on 30.09.2015 declaring total loss of Rs.(-) 7,19,33,633/-. During the year under reference, the assesseecompany entered into an operation and management agreement on 16.07.2014 for acquiring the Operation and Management Rights of "M/s Nanavati Hospital" for a period of 29 years and paid an amount of Rs.25 crores as non-refundable deposit. According to the assessee, the said amount was non-refundable, therefore, the assessee capitalized the said amount as intangible asset eligible for depreciation u/s 32 of the Income Tax Act, 1961 (in short 'the Act') and claimed depreciation on the same. 3.1 During the year und....
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.... prejudicial to the interest of the Revenue and therefore, he issued notice u/s 263 of the Act show causing to the assessee as to why the assessment order should not be set aside/cancelled being erroneous in so far as prejudicial to the interest of the Revenue , on the ground of no inquiries carried out in respect of receiving share premium as well as depreciation on the deposit of Rs.25 crores to the person running the Nanavati Hospital. 5. Before the Ld. PCIT, the assessee submitted that Assessing Officer has carried out inquiries and after verification of the submission, he has passed the assessment order ,therefore, order of the Assessing Officer is not erroneous in so far as prejudicial to the interest of the Revenue. The Ld. PCIT however rejected the contentions of the assessee and held that the assessment order is erroneous in so far as prejudicial to the interest of the Revenue in view of lack of inquiry by the Assessing Officer on the issue of share premium received by the assessee and depreciation on deposit. Aggrieved, the assessee is before the Tribunal raising the grounds as reproduced above. 6. Before us, the assessee has filed a Paper Book containing pages 1 to 184....
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....sues on the basis of which the case was selected for scrutiny. Further, he submitted that contention of the Ld. counsel that the Assessing Officer issued show cause to the assessee on the issue of application of provisions of section 56(2)(viib) is factually incorrect. According to him, no inquiry was conducted by the Ld. Assessing Officer on the issue of the application of the provision of section 56(2)(viib) in respect of share premium and depreciation on the deposit. He further submitted that in the case of the assessee, scrutiny proceedings have been conducted through e-assessment mode wherein the Assessing Officer was required to raise the inquiries through E-mail and assessee was also supposed to respond through the E-mail only , but in the present case, the submission dated 01.12.2017 claimed to have been filed before the Assessing Officer physically do not contain any stamp of the receipt of the office of Assessing Officer and even said letter has not been filed through E-mail. 7.3 We have heard rival submission of the parties and perused the relevant material on record. For an assessment order to be held liable to revision under section 263 of the Act, the twin conditions....
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....s the failure to make such an inquiry. The order becomes erroneous because such an inquiry has not been made and not because there is any thing wrong with the order if all the facts stated therein are assumed to be correct. Nor can ii be said that it was necessary for the Commissioner to himself make such inquiry before cancelling the order of assessment." 7.5 Similarly, Hon'ble Calcutta High Court in the case of CIT Central-1 Vs Maithan International (Cal) IT Appeal No. 53 of 2012 has observed as under : "It is not the law that the Assessing Officer occupying the position of an investigator and adjudicator can discharge his functions by perfunctory or inadequate investigation. Such a course is bound to result in erroneous and prejudicial orders. Where the relevant enquiry was not undertaken, as in this case, the order is erroneous and prejudicial too and therefore revisable. Investigation should always be faithful and fruitful. Unless all truthful areas of enquiry are pursued the enquiry cannot be said to have been faithfully conducted." 7.6 The Hon'ble Delhi High Court has again emphasized in the case of ITO versus DG Housing Projects Ltd. ITA 179/2011 that where there is c....
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....ate conduct of assessment proceedings electronically, Income-tax Department has launched 'E-Proceeding' facility. It is a simple way of communication between the Department and assessee, through electronic means, without the necessity to visit Income-tax Office for conduct of assessment proceedings. This taxpayer friendly measure would substantially reduce the compliance burden for the assessee. * In assessment proceeding, 'E-Proceeding' would enable seamless flow of Letter(s)/ Notice(s), Questionnaire(s), Order(s), etc. from Assessing Officer to the concerned assessee's in 'e-Filing' website. On receipt of Departmental communication, assessee would be able to submit the response along with attachments by uploading the same, on 'e-Filing' portal. The response submitted by the assessee would be viewed by the Assessing Officer electronically in Income Tax Business Application (ITBA) module. This would, besides saving precious time of the assessee, would also provide a 24X7 anytime/ anywhere convenience to submit response to the Departmental queries in course of assessment proceedings. The taxpayers, who are not yet having an account on the e-Filing website of the Income-tax Depart....
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....t (order sheet) recorded on the e-portal. The letter dated 01.12.2017 claimed to have filed by the assessee before the AO is not found to be recorded in said note sheet. In this regard, the assessee filed an affidavit from its Authorized representative during assessment proceedings (Chartered Accountants Sh. Manoj Kumar More and Sh Narottam Bagaria) which says that letter was filed before the Assessing Officer. But, the present Assessing Officer in his submission dated 15/03/2022, filed before the Bench through Ld. DR, has submitted that there was no stamp of the office of the AO on letter dated 01/12/2017 of the assessee. The Ld. DR submitted that in absence of the assessment record it could not be proved that the assessee filed said letter before the Assessing Officer and the onus was of the assessee to prove, as it is the assessee who is making the claim. 7.13 In back ground of the above facts, we have to decide whether the Ld AO has carried out the enquiry on the two issues i.e. applicability of section 56 (2)(viib) and depreciation on deposit of Rs.25 crore. 7.14 We find that the Assessing Officer has only issued notice dated 04/09/2017 u/s 142(1) of the Act, calling for the....
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....report and to undertake a proper verification or enquiry on the issue of the share premium, however no such verification or enquiry was conducted by the Assessing Officer. We concur with the above observations of the Ld. PCIT. The AO has been given duty not only to adjudicate the issue in dispute but also to investigate the matter, but he has simply placed those valuation reports on record and did not attempt to verify as why the share premium has been charged on one set of equity shares, whereas not charged in another set of equity shares that too issued in same financial year. Regarding the depreciation also the Assessing Officer has not made any enquiry after receipt of information from the assessee, as to how the advance paid to seller party will become intangible property of the assessee eligible for depreciation. The AO was required to enquire ownership of the said intangible right in the hands of the assessee, but nothing on record , which could show that he had made any enquiry. 7.18 Before us the Ld. counsel of the assessee submitted that after verifying the details filed by the assessee i.e. letter dated 12/10/2017 and 06/11/2017, the Assessing Officer issued show cause ....
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....gh Court in the case of CIT Vs Development Credit Bank Ltd (2010) 323 ITR 206 (Bom) also the Hon'ble High Court held that since the enquiry was specifically held with reference to the issue of capital gain by the AO in original assessment proceedings, therefore invoking the revisionary jurisdiction under section 263 on the issue of the capital gain was not justified. 7.21 When we compare the facts of the instant case before us with the above cases cited by the Ld. counsel of the assessee, we find that in our case no enquiry has been conducted by the Assessing Officer and therefore, ratio in the above cases cannot be applied over the facts of the instant case. 7.22 Further, the Ld. counsel of the assessee relied on the decision of Hon'ble Gujarat High Court in the of Pr. CIT v. Shreeji Prints (P.) Ltd. [2021] 130 taxmann.com 293 (Gujarat) (HC) wherein it is held that if the Explanation-2 to section 263 is not invoked in the show cause letter issued, the Ld. PCIT is not justified in invoking said Explanation while holding order as erroneous and prejudicial to the interest of Revenue. On perusal of the impugned order, we find that Ld. Pr. CIT has held the assessment order erroneous ....
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....ssue of change of opinion is involved in the case before us. 7.25 In view of the above facts and circumstances and discussion we are of the opinion that there is no error in the order of the Ld. PCIT and accordingly we uphold the same. The grounds raised by the assessee for AY 2015-16 are accordingly dismissed. ITA No. 896/MUM/2021 Assessment Year: 2016-17 8. Now we take up the appeal of the assessee for assessment year 2016-17. The grounds identical to what have been raised in assessment year 2015-16, have been raised by the assessee in the year under consideration also. In the assessment year under consideration, the assessee has issued and allotted 1,07,38,281 equity shares of Rs. 10 each at premium of Rs. 10 per share. It is the submission of the assessee that premium has been charged on the basis of the valuation report of the merchant banker. In the year under consideration, the assessing officer issued notice under section 142(1) dated 8/08/ 2018, wherein he called for the information from the assessee in respect of the large share premium and applicability of section 56(2)(viib) in identically worded query as was asked in notice under section 142(1) dated 04/09/2017 f....