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2021 (3) TMI 407 - AT - Income TaxRevision u/s 263 - reopening of assessment u/s 147 - book value per share of the assessee company did not justify the issue of shares at a premium, and also the nature and source of such unjustified premium remained unproved and unexplained within the meaning of Sec. 68 - HELD THAT - AO while framing the assessment in the case of the assessee for A.Y 2009-10, by not bringing the impugned amount of share premium to tax in the hands of the assessee company had thus, by so doing acted as per the mandate of law as then so available on the statute and thus, taken a possible and plausible view which by no means could have been dislodged by the Pr. CIT in exercise of his revisional jurisdiction under Sec.263 of the Act. Period of limitation - Contention of the A.R that as the period of limitation provided for under sub-section (2) to Sec. 263 in the present case was to be reckoned from the end of the financial year in which the intimation under sub-section (1) to Sec. 143 was passed in the case of the assessee, and not from the order of reassessment passed under Sec.143(3) r.w.s 147, dated 13.11.2014, the impugned order passed u/s 263 was thus barred by limitation is acceptable that as the alleged error was not the subject matter of the reassessment proceedings under Sec.147 of the Act, therefore, the period of limitation contemplated in sub-section (2) to Sec. 263 would stand triggered with reference to the date on which the initial intimation under Sec. 143(1) was passed in the case of the assessee company and the same by no means could be related to the date of passing of reassessment order under Sec. 143(3) r.w.s 147, dated 13.11.2014. The impugned order of revision passed by the Pr. CIT under Sec. 263 of the Act pertaining to the aforesaid issue which was not the subject matter of the reassessment order passed by the AO under Sec. 143(3) r.w.s 147, dated 13.11.2014, could have been validly passed within a period of two years from the end of the financial year in which the intimation under sub-section (1) of Sec. 143 sought to be revised was passed, which not having been so done within the aforesaid prescribed period was thus barred by limitation. We are of the considered view that the Pr. CIT had wrongly assumed jurisdiction and therein passed the order under Sec. 263 r.w.s. 254 of the Act, dated 04.12.2019, which thus for the reasons discussed at length by us hereinabove cannot be sustained and is liable to be vacated. Accordingly, we herein set aside the order passed by the Pr. CIT under Sec. 263 r.w.s 254 - Decided in favour of assessee.
Issues Involved:
1. Validity of jurisdiction assumed by the Principal Commissioner of Income Tax (Pr. CIT) under Section 263 of the Income Tax Act, 1961. 2. Whether the reassessment order was erroneous and prejudicial to the interest of the revenue. 3. Applicability of Section 56(2)(viib) and proviso to Section 68 for the assessment year under consideration. 4. Time-barred nature of the order passed under Section 263. 5. Legitimacy of the share capital and premium received by the assessee. Issue-wise Detailed Analysis: 1. Validity of Jurisdiction Assumed by Pr. CIT under Section 263: The assessee contended that the Pr. CIT erroneously assumed jurisdiction under Section 263 of the Income Tax Act. The Pr. CIT sought to revise the order concerning an issue that was not the basis for reopening the case under Section 147. The Tribunal agreed with the assessee, stating that the Pr. CIT cannot hold the reassessment order as erroneous when the issue that formed the basis for reopening was not addressed in the reassessment order. The Tribunal cited the case of CIT Vs. Jet Airways (I) Pvt. Ltd. (2010) 195 taxman 117 (Bom), which held that if no addition is made regarding the issue on which the case was reopened, the AO cannot independently assess other income. 2. Erroneous and Prejudicial to the Interest of Revenue: The Pr. CIT observed that the AO failed to verify the genuineness of the share capital and premium received by the assessee, amounting to ?2.18 crores, based on information from the DGIT (Inv.), Mumbai. However, the Tribunal noted that this information was not part of the "reasons to believe" for reopening the case. Therefore, the reassessment order could not be deemed erroneous on these grounds. 3. Applicability of Section 56(2)(viib) and Proviso to Section 68: The assessee argued that Section 56(2)(viib) and the proviso to Section 68 were introduced with effect from 01.04.2013 and are prospective in nature. The Tribunal agreed, citing judgments from the Hon'ble High Court of Delhi in CIT Vs. Stellar Investments Ltd. (1991) 192 ITR 287 (Del) and the Hon'ble Supreme Court in CIT Vs. Stellar Investments Limited (2001) 251 ITR 263 (SC). The Tribunal concluded that the AO’s decision not to add the share premium to the income of the assessee company was in line with the law applicable at the time and thus could not be revised by the Pr. CIT under Section 263. 4. Time-Barred Nature of the Order Passed under Section 263: The assessee claimed that the order passed under Section 263 was time-barred. The Tribunal supported this claim, referencing the Hon'ble Supreme Court's judgment in CIT Vs. Alagendran Finance Limited (2007) 293 ITR 1 (SC) and the Hon'ble High Court of Bombay in CIT Vs. M/s Lark Chemicals Ltd. (2014) 368 ITR 655 (Bom). The Tribunal concluded that the limitation period for the Pr. CIT to pass an order under Section 263 should be reckoned from the end of the financial year in which the initial intimation under Section 143(1) was passed, not from the reassessment order under Section 143(3) r.w.s 147. 5. Legitimacy of the Share Capital and Premium Received: The Tribunal examined the legitimacy of the share capital and premium received by the assessee. The Pr. CIT’s reliance on information from the DGIT (Inv.), Mumbai, regarding accommodation entries from Shri Praveen Kumar Jain was found to be misplaced as it was not part of the "reasons to believe" for reopening the case. The Tribunal upheld the AO's decision not to make any addition regarding the share premium, stating it was a possible and plausible view based on the law as it stood at the time. Conclusion: The Tribunal set aside the order passed by the Pr. CIT under Section 263 r.w.s 254, dated 04.12.2019, and restored the reassessment order passed by the AO under Section 143(3) r.w.s 147, dated 13.11.2014. The appeal filed by the assessee was allowed.
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