TaxTMI 
TaxTMI 
TaxTMI 
2023 (6) TMI 805
X X X X Extracts X X X X
X X X X Extracts X X X X
....ocumentary evidences brought on record in light of Rule 18(6) of IITAT Rules. 4. We have given thoughtful consideration to the orders of the authorities below. 5. Briefly stated, the facts of the case are the assessee is a public company incorporated under the laws of Mauritius in 2010 and operates as an investment holding company. For the purposes of Indian tax laws, the assessee is a non resident company and is a tax resident of Mauritius under Article 4 of the India Mauritius Tax Treaty. 6. The assessee holds a valid tax residency certificate issued in Mauritius for the period under consideration. The assessee also holds a valid global business license issued by the Financial Services Commission in Mauritius. 7. The assessee filed its return of income electronically on 30.10.2017. The total income of the assessee was computed as under: A INCOME FROM CAPITAL GAINS / (LOSS) 1 Total Taxable Income under head Long Term Capital Gains / Loss - Unlisted Long Term Capital Gains on sale of shares of Youngmonk Technologies Pvt. Ltd. (unlisted shares) (Refer Note to Computation) Less; Exempt under provisions of India-Mauritius Tax Treaty Long Term Capital Loss on sale of....
X X X X Extracts X X X X
X X X X Extracts X X X X
....ome Tax Department. Till such an account is created by you, assessment proceedings shall be carried gut either through your e-mail account or manually (if e-mail is not available) e) In cases where order has to be passed under section 153A/153C of the Income Tax Act, 1961 read with section 143(3), assessment proceedings; would be conducted manually. Yours faithfully Sd/- Mikesh Kumar Sinha Circle Intl. Tax 3(1)(2)Del 9. The assessee filed detailed reply which reads as under: 15 November 2019 By email Assistant Commissioner of income Tax Circle Int. Tax (1)(2) Civic Centre, Minto Road New Delhi-110002 India Dear Sir Re: SAIF Partners India IV Limited (hereinafter referred to as the "Company" or the "Assessee") Permanent Account Number : AAOCS8595D Assessment Year : 2017-18 Financial Year : 2016-17 Subject: Notice dated 8 November 2019 issued under Section 142(1) of the Income-tax Act, 1961 (the "Act") This is in connection with notice under section 142(1) of the Act issued by your office dated 8 November 2019 (enclosed as Annexure 1) seeking information and details of the Assessee. In this regard, we respectfully submit the foll....
X X X X Extracts X X X X
X X X X Extracts X X X X
.... enclosed as Annexure 4. 2. In response to query No. 12 The Company has received no orders under section 195(2) of the Act from the payers during the relevant AY. 3. In response to No. 23 and No. 24 The Company maintains no bank accounts in India. 4. In response to No. 28 The copy of Form 26AS for AY 2017-18 is enclosed as Annexure 5. 5. In response to No. 35 The assessment proceedings under the Act are initiated for the first time during the relevant AY for the Company. 6. In response to No. 10, No. 25, No. 37 7. As stated above, the Company has no business operations in India and holds no bank account in India. During the relevant AY, the Company received (i) payment with respect to share transfer and (ii) dividend income from India. Since the Company has no bank account in India, the aforesaid payments were remitted to foreign bank account of the Company through normal banking channels. Further, request you to refer the notes to computation for details. We request you to take the above on record and oblige. In case your office requires any clarification with respect to the above, the Company will furnish the same on hearing from your office. Thanking y....
X X X X Extracts X X X X
X X X X Extracts X X X X
....d stock exchange. * Where shares being sold are - (a) equity shares; (b) listed on recognized stock exchange; and (c) chargeable to securities transaction tax ("STT"), then any income arising from the same shall be exempt under the provisions of section 10(38) of the Act. * The Company is a tax resident of Mauritius and is entitled to be governed by the beneficial provisions of Indian-Mauritius Tax Treaty ("Tax Treaty"). As per Article 13 of the Tax Treaty, any gains arising from the transfer of shares of Indian entity shall be taxable in Mauritius. It is submitted that the Company has chosen to opt for the beneficial provisions of the Tax Treaty. * In the above background, details of shares transferred by the Company during the year under consideration along with computation of capital gains / loss are provided as under : 1. A2 Media Private Limited Unlisted equity shares Long Term Capital Loss on transfer - INR 219,865,449 These shares were held by the Company for more than 24 months and accordingly, qualify as LTCA. Any gains or loss arising on transfer of such asset will be taxable as Long Term Capital Gains or Long Term Capital Loss respectively. On tra....
X X X X Extracts X X X X
X X X X Extracts X X X X
.... Act. Notwithstanding the above, the Company reserves its right to make additional submissions/claims (including carry forward of losses) in case your office do not concur with the positions taken by the Company. Yours faithfully, Sd/- Shafiq-Ur-Rahmaan Soyfoo" 11. From the perusal of notes to computation of income [supra] it can be seen how the loss was computed with a specific mention that on transfer of such shares, though the company has incurred loss, but has opted not to carry forward the said loss. 12. Specific reply of the assessee alongwith notes to computation of income was considered by the Assessing Officer who completed the assessment vide order dated 09.12.2019. Assuming jurisdiction conferred upon him by provisions of section 263 of the Act, the ld. CIT issued notice dated 06.01.2022 which reads as under: GOVERNMENT OF INDIA MINISTRY OF FINANCE INCOME TAX DEPARTMENT CIT (IT), DELHI-3 SAIF PARTNERS INDIA IV 3RD FLOOR, STANDARD CYBERCITY EBENE MAURITIUS, FOREIGN Mauritius PAN: Asst Year Dated: DIN & Letter No : AAOCS8595D 2017-18 06/01/2022 ITBA/COM/F/17/202 1-22/1038500707(1) Sir/ Madam/ M/s, Subject: Online service ....
X X X X Extracts X X X X
X X X X Extracts X X X X
....passed without making necessary factual verification and application of correct legal provisions to ascertain the tax liability of the receipts in the hands of the assessee. Therefore, the order is erroneous and therefore prejudicial to the interest of the revenue. In view of the above, you are requested to show cause as to why necessary action should not be taken in your case under section 263 of the Income-tax Act. You are requested to submit reply along with all necessary details on or before 17.01.2022. Sd/- Pitambar Das Commissioner of Income tax International taxation, New Delhi 13. We have given thoughtful consideration to the initiation of proceedings u/s 263 of the Act. We are of the considered view that the ld. CIT has wrongly assumed jurisdiction on wrong facts in as much as, as mentioned elsewhere, the assessee has made its intention very clear in the notes to computation of income wherein it has specifically mentioned and clarified that the assessee is not inclined to claim the carry forward of losses on sale of shares. 14. We are of the further opinion that the ld. CIT proceeded on the premise that the assessee is a newly incorporated company whic....
X X X X Extracts X X X X
X X X X Extracts X X X X
....her one is the fair market value of unquoted equity shares determined by Discounted Free Cash Flow (DCF) Method. However under Rule 11UA(2), if an assessee choose the valuation of unquoted equity shares as per the Discounted Free Cash Flow Method, then he has to obtain a report from Merchant Banker. Assessee has not furnished the valuation reports as required Under the law. Manpasand Beverages Ltd is a listed company. Therefore, the fair market value of at purchase as well as on sale may be taken from the stock exchange to compute the Capital gains/loss. 11.7 In view of the above AO is directed to conduct further inquiry and call for relevant details to ascertain the fair market value of those shares on the date of acquisition and sale in each case. The capital gain is full value consideration less cost of acquisition. The full value consideration may or may not be identical to sale consideration. The AO, therefore, is directed to ascertain the full value consideration in each case. AO is directed further to compute the capital gains in each case as per the computation mechanism provided in provisos to section 48 of the Act. AO may also conduct other inquiries as she/he deems ap....
X X X X Extracts X X X X
X X X X Extracts X X X X
....st exist to enable the Commissioner to exercise power of revision under this sub-section, viz., (i) the order is erroneous; (ii) by virtue of the order being erroneous prejudice has been caused to the interests of the Revenue. It has, therefore, to be considered firstly as to when an order can be said to be erroneous. We find that the expressions "erroneous", "erroneous assessment" and "erroneous judgment" have been defined in Black's Law Dictionary. According to the definition, "erroneous" means "involving error; deviating from the law". "Erroneous assessment" refers to an assessment that deviates from the law and is, therefore, invalid, and is a defect that is jurisdictional in its nature, and does not refer to the judgment of the Assessing Officer in fixing the amount of valuation of the property. Similarly, "erroneous judgment" means "one rendered according to course and practice of court, but contrary to law, upon mistaken view of law; or upon erroneous application of legal principles". 12. From the aforesaid definitions it is clear that an order cannot be termed as erroneous unless it is not in accordance with law. If an Income-tax Officer acting in accordance with law....
X X X X Extracts X X X X
X X X X Extracts X X X X
....s it is prejudicial to the interests of the Revenue. We have already held what is erroneous. It must be an order which is not in accordance with the law or which has been passed by the Income-tax Officer without making any enquiry in undue haste. We have also held as to what is prejudicial to the interests of the Revenue. An order can be said to be prejudicial to the interests of the Revenue if it is not in accordance with the law in consequence whereof the lawful revenue due to the State has not been realised or cannot be realised. There must be material available on the record called for by the Commissioner to satisfy him prima facie that the aforesaid two requisites are present. If not, he has no authority to initiate proceedings for revision. Exercise of power of suo-motu revision under such circumstances will amount to arbitrary exercise of power. It is well-settled that when exercise of statutory power is dependent upon the existence of certain objective facts, the authority before exercising such power must have materials on record to satisfy it in that regard. If the action of the authority is challenged before the court it would be open to the courts to examine whether ....
X X X X Extracts X X X X
X X X X Extracts X X X X
....rder were to incorporate the reasons for upholding the claim made by an assessee, the result would be an epitome and not an assessment order. In this case, during the assessment proceedings for both the Assessment Years, the Assessing . A.Y. 2009-10 Officer issued a query memo to the assessee, calling upon him to justify the genuineness of the gifts. The Respondent-Assessee responded to the same by giving evidence of the communications received from his father and his sister i.e. the donors of the gifts along with the statement of their Bank accounts. On perusal, the Assessing Officer was satisfied about the creditworthiness/capacity of the donors, the source from where these funds have come and also the creditworthiness/ capacity of the donor. Once the Assessing Officer was satisfied with regard to the same, there was no further requirement on the part of the Assessing Officer to disclose his satisfaction in the Assessment Order passed thereon. Thus, this objection on the part of the Revenue cannot be accepted." 21. We find that the Hon'ble Delhi High Court in the case of CIT Vs Sunbeam Auto reported in 332 ITR 167 has held as held as under: "We have considered the rival s....
X X X X Extracts X X X X
X X X X Extracts X X X X
....r was erroneous and prejudicial to the interests of the Revenue. 10. For the purposes of exercising jurisdiction under section 263 of the Act, the conclusion that the order of the Assessing Officer is erroneous and prejudicial to the interests of the Revenue has to be preceded by some minimal inquiry. In fact, if the Principal Commissioner of Income-tax is of the view that the Assessing Officer did not undertake any inquiry. it becomes incumbent on the Principal Commissioner of Income-tax to conduct such inquiry. All that the Principal Commissioner of Income-tax has done in the impugned order is to refer to the circular of the Central Board of Direct Taxes and conclude that "in the case of the assessee-company, the Assessing Officer was duty-bound to calculate and allow depreciation on the BOT inconformity of the Central Board of Direct Taxes Circular No. 9 of 2014 but the Assessing Officer failed to do so. Therefore, the order of the Assessing Officer is erroneous insofar as prejudicial to the interests of the Revenue". 11. In the considered view of the court, this can hardly constitute the reasons required to be given by the Principal Commissioner of Income-tax to justify t....