2021 (6) TMI 1032 - AT - Income Tax

Revision u/s 263 - Valuation of fair market value of the unquoted per equity share - HELD THAT - AO at the time of assessment order / proceedings has specifically raised queries relating to the fair market value of the unquoted per equity share and the related document were present before the AO while passing the final assessment order. After perusal of the document which were presented before the AO, we have noticed that the reasoning given by the Pr. CIT that the total share of 39,510 at ₹ 220/- per share against the face value of ₹ 10/- each and the received share premium to the tune of ₹ 82,97,100/-, has totally ignored the explanation given by the Assessee before the Assessing Officer as well as before the Pr. CIT. The assessee has properly demonstrated through bank statement, the valuation under Rule 11UA along with audit report and audit trading account as relates to the FMV of the share premium. There is no prejudice to the revenue and Section 263 of the Act cannot be invoked in the present case. After going through the evidences and submissions the Assessing Officer passed the Assessment Order. While invoking Section 263 (1) of the Income Tax Act, 1961, the Pr. CIT has not made out the case that the Assessment Order is passed without making inquiries or verification which should have been made. There was no material brought by the Pr. CIT stating therein that the Assessment Order is passed allowing any relief without inquiring into the claim of the assessee. - Decided in favour of assessee. In the present case the Assessing Officer has made all the inquiries and after verifying the documents/ material on record passed a reasoned Assessment Order. Therefore, the Commissioner does not have any locus standi to make further inquiry. - Decided in favour of assessee.

Summary

Issues:
Appeal against order under Section 263 of the Income Tax Act, 1961 for assessment year 2014-15.

Analysis:
The appeal was filed by the assessee against the order passed by the Principal Commissioner of Income Tax, Gurgaon under Section 263 of the Income Tax Act, 1961. The grounds of appeal focused on the contention that the order under Section 263 was arbitrary, erroneous, and unlawful. The assessment for A.Y. 2014-15 involved scrutiny due to various reasons like large share premium received, unsecured loans, and mismatch in amounts paid to related persons. The AO made additions and disallowances during the assessment. The Principal Commissioner issued notices under Section 263 due to the AO's failure to examine the justification of share premium and creditworthiness of subscribers. The Pr. CIT set aside the assessment order, directing a fresh assessment on this specific issue only.

The assessee argued that proper verification was done by the AO during assessment proceedings under Section 143(3) of the Act. The AR highlighted the queries raised by the AO, documents submitted, and compliance with the assessment process. The AR also emphasized technical flaws in the notice issued under Section 263 and cited relevant legal precedents to support the appeal. On the other hand, the DR contended that the valuation report was not before the AO, and no proper verification was conducted regarding the fair market value of share premium.

After hearing both parties, the ITAT Delhi observed that the AO had raised queries related to fair market value, and relevant documents were presented during assessment. The tribunal noted that the explanation provided by the assessee was supported by bank statements, valuation reports, and audit documents. It was concluded that there was no prejudice to revenue, and Section 263 could not be invoked. The tribunal emphasized that the AO had conducted inquiries and passed a reasoned assessment order, negating the need for further scrutiny under Section 263. Legal precedents were cited to support the decision that not every loss of revenue constitutes an erroneous order prejudicial to revenue. The tribunal set aside the order under Section 263, allowing the appeal of the assessee.

In conclusion, the ITAT Delhi allowed the appeal of the assessee, setting aside the order passed by the Principal Commissioner of Income Tax under Section 263 of the Income Tax Act, 1961 for the assessment year 2014-15.