×Latest Case Laws on Income Tax by various Income Tax Appellate Tribunals in India
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With this appeal, the assessee has challenged the validity of the order dated 31.01.2019 framed u/s 263 of the Income-tax Act, 1961 [hereinafter referred to as 'The Act'] by the Pr. CIT, Gurgaon pertaining to A.Y 2014-15.
2. Facts on record show that in this case, assessment was completed u/s 143(3) of the Act vide order dated 25.11.2016. On a perusal of the assessment record, the ld. PCIT was of the strong belief that the assessment order passed by the Assessing Officer is erroneous and prejudicial to the interest of the Revenue for the reason that the assessee-company has issued total 21,984 shares @ Rs. 678.52 per share to various parties against the face value of Rs. 10/- each and received share premium to the tune of Rs. 1,49,16,583/-. The ld PCIT was of the opinion that the Assessing Officer was required to examine and verity the justification of share premium with regard to FMV and the creditworthiness of the subscriber to whom the said shares have been allotted at a huge premium.
3. According to the ld. PCIT, since the Assessing Officer had failed to apply his mind and to examine the same, this non-application of mind of the Assessing Officer in framing the assessment order leads to the completion of order as erroneous and prejudicial to the Revenue. Accordingly, the ld. PCIT issued notice u/s 263 of the Act. Proceedings were attended and queries raised by the ld. PCIT were duly replied by the assessee.
4. After considering the submissions of the assessee, the ld. PCIT concluded that the Assessing Officer has failed to apply his mind and has not examined the receipt of share premium thereby making the assessment order erroneous and prejudicial to the interest of the Revenue and accordingly, the ld. PCIT set aside the assessment order and directed the Assessing Officer to pass fresh assessment order after making proper enquiries/verifications.
5. Before us, the ld. counse for the assessee vehemently submitted that the ld. PCIT has wrongly assumed jurisdiction u/s 263 of the Act. It is the say of the counsel that during the course of assessment proceedings, the Assessing Officer has raised specific queries to which the assessee had replied, specifically supported with documentary evidences and therefore, it cannot be said that the Assessing Officer has not made any enquiry on the impugned issue. The ld. counsel for the assessee further stated that the ld. PCIT has grossly erred in treating the entire increase in share capital for the year under consideration.
6. The ld. counsel for the assessee pointed out that the assessee has issued Compulsorily Convertible Debenture [CCD] aggregating to Rs. 1.35 crores in the immediately preceding Assessment Year 2013-14. The ld. counsel for the assessee further stated that during the year under consideration, CCD alongwith accrued interest thereon were converted into equity shares of the appellant at Rs. 688.52 per share which included face value of Rs. 10/- and share premium of Rs. 678.52 per share.
7. The ld. counsel for the assessee further stated that only share capital and premium aggregating to Rs 25 lakhs belonged to the year under consideration and balance is brought forward CCD converted into equity shares. The ld. counsel for the assessee concluded by stating that since the ld. PCIT has himself proceeded on erroneous facts, which itself shows non-application of mind by the ld. PCIT, therefore, the order framed u/s 263 of the Act deserves to bequashed.
8. Per contra, the ld. DR strongly supported the findings of the ld. PCIT. It is the say of the ld. DR that Explanation 2 has been inserted in section 263 of the Act by the Finance Act, 2015 w.e.f 01.06.2015 and the said Explanation squarely applies on the facts of the case in hand.