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2021 (5) TMI 16 - AT - Income TaxRevision u/s 263 - Share issued at Premium by the assessee - whether the A.O. had made the proper enquiry or not and that the view taken by the A.O. was a possible view in accordance with law or not? - HELD THAT - CIT was not justified in considering the assessment order passed by the AO as erroneous and prejudicial to the interest of the Revenue, particularly when the AO after making the proper enquiry and considering the various documents furnished by the assessee, had taken a possible view. Therefore, the Ld. Pr. CIT was not justified in considering the assessment order passed by the AO as erroneous on this basis that the assessee could not produce the Directors, as has been held in the aforesaid referred to case of M/s. Technico Metals Pvt. Ltd. Vs. DCIT. 2019 (2) TMI 1923 - ITAT CHANDIGARH In the present case, as we have already pointed out that the AO asked the assessee to furnish the relevant details relating to the shares issued at premium to various companies and the assessee furnished all the relevant documents which were examined by the AO who had taken a possible view, therefore as per the ratio laid down bin MALABAR INDUSTRIAL CO. LTD. VERSUS COMMISSIONER OF INCOME-TAX 2000 (2) TMI 10 - SUPREME COURT in the aforesaid referred to case, even if the Ld. Pr. CIT did not agree with the view taken by the A.O., the said assessment order passed by the A.O., cannot be treated as an erroneous order and prejudicial to the interest of the Revenue. As regards to the allegation that the assessee could not produce Director of the Investor companies, it is noticed that the assessee furnished confirmatory letters received from the Investing companies alongwith copies of the Balance Sheets, copies of Ledger Accounts of the broker etc and requested to the Ld. Pr. CIT to issue commission as per provisions of Section 131(1)(d) of the Act, since all the Directors of Investing Companies were permanently based in Kolkata which was nearly 1700 Km away from Ludhiana and therefore the assessee requested to AO to issue the commission. However the AO after appreciating the complete documentary evidences placed on record and applying his mind to the facts of the case, accepted the evidences filed by the assessee and had taken a possible view. Ld. Pr. CIT was not justified in exercising his powers under section 263 - Decided in favour of assessee.
Issues Involved:
1. Jurisdiction of the Principal Commissioner of Income Tax (Pr. CIT) under Section 263 of the Income Tax Act, 1961. 2. Adequacy of enquiries conducted by the Assessing Officer (A.O.) during the assessment proceedings. 3. Validity of the assessment order passed by the A.O. under Section 143(3) of the Income Tax Act, 1961. 4. Genuineness of the share premium received by the assessee. 5. Legal precedents and their applicability to the case. Detailed Analysis: 1. Jurisdiction of the Principal Commissioner of Income Tax (Pr. CIT) under Section 263 of the Income Tax Act, 1961: The primary issue raised by the assessee was the jurisdiction assumed by the Pr. CIT under Section 263 of the Income Tax Act, 1961. The assessee contended that the assessment order dated 27.12.2016 passed by the A.O. was neither erroneous nor prejudicial to the interest of the Revenue. The Pr. CIT, however, exercised his revisionary power under Section 263, observing that proper and sufficient enquiries had not been made by the A.O., rendering the assessment order erroneous and prejudicial to the interest of the Revenue. 2. Adequacy of enquiries conducted by the Assessing Officer (A.O.) during the assessment proceedings: The Pr. CIT noted that the A.O. had not conducted adequate enquiries regarding the share premium received by the assessee. Specifically, the A.O. did not investigate the identity, creditworthiness, and genuineness of the transactions involving the share premium. The Pr. CIT observed that the A.O. merely obtained confirmations from the assessee without conducting independent verification. The assessee, however, argued that all necessary documents and information were furnished during the assessment proceedings, including confirmations from the investor companies, bank statements, and audited financial statements. The A.O. had accepted the Fair Market Value of ?25 per share based on the valuation report provided by the assessee. 3. Validity of the assessment order passed by the A.O. under Section 143(3) of the Income Tax Act, 1961: The Pr. CIT considered the assessment order passed by the A.O. as erroneous due to the lack of proper enquiry. The assessee contended that the A.O. had made proper enquiries and had applied his mind to the facts and circumstances of the case. The Tribunal observed that the A.O. had issued notices under Section 142(1) and 133(6) of the Act, to which the assessee had responded with detailed explanations and supporting documents. The A.O. had examined these documents and accepted the valuation of the shares issued at a premium. 4. Genuineness of the share premium received by the assessee: The Pr. CIT questioned the genuineness of the share premium received by the assessee, noting that the investor companies were not produced before the A.O. The assessee argued that the investor companies were based in Kolkata and could not be produced due to short notice. The assessee requested the issuance of a commission to procure further information. The Tribunal noted that the A.O. had accepted the valuation of the shares and the documents provided by the assessee, including confirmations from the investor companies, bank statements, and audited financial statements. 5. Legal precedents and their applicability to the case: The Tribunal referred to several legal precedents, including the judgments of the Hon'ble Delhi High Court in CIT Vs. Sunbeam Auto Ltd. and DIT Vs. Jyoti Foundation, which held that if the A.O. had made enquiries and applied his mind to the facts, the assessment order could not be considered erroneous. The Tribunal also referred to the decision of the Hon'ble Supreme Court in Malabar Industries Vs. CIT, which held that an order could be considered erroneous and prejudicial to the interest of the Revenue only if both conditions were satisfied. Conclusion: The Tribunal concluded that the A.O. had made proper enquiries and had applied his mind to the facts and circumstances of the case. The assessment order passed by the A.O. was a possible view and could not be considered erroneous and prejudicial to the interest of the Revenue. The Pr. CIT was not justified in exercising his powers under Section 263 of the Act. The Tribunal quashed the order passed by the Pr. CIT and restored the assessment order passed by the A.O. The appeal of the assessee was allowed.
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