2019 (3) TMI 556 - AT - Income Tax

Revision u/s 263 - AO having recorded that the investments made by India Cements Ltd., are not in the nature of capital investment but are the payments made for certain benefits, has erred in not bringing the full amount to tax on receipt basis - HELD THAT - Tribunal has directed the Assessing Officer to examine the acceptability of the share capital as well as share premium as Income of assessee . The order of CIT u/s. 263 is also to this effect only. On a query by us, both the parties submitted that the AO has already passed the order consequent to the CIT s directions u/s. 263 and therefore the issue is no longer open before the AO and that the appeal against the same is pending before the CIT(A). Since the directions of the Tribunal to the Assessing Officer are on similar lines as given by the CIT u/s. 263 of the Act, we confirm the order of CIT and direct the CIT(A), before whom the appeal against the consequential order is pending, to examine the issue in line with our directions in assessee s appeal for the AY. 2009-10 against the regular assessment made u/s. 143(3) of the Act. In view of the same, the appeal of assessee is dismissed.

Summary

Issues:
Assessment order under section 263 of the Income Tax Act regarding treatment of share premium as income.

Analysis:
1. The case involved an appeal by the assessee against the order of the Commissioner of Income Tax-II, Hyderabad, under section 263 of the Income Tax Act. The Assessing Officer had treated the entire amount received towards share premium as income of the assessee-company under section 28(iv) of the Act. The CIT found the assessment order erroneous and prejudicial to the Revenue's interest as the share application money received was not treated as income. The CIT directed the Assessing Officer to tax the sum of ?50,00,00,705. The assessee challenged this revision order on various grounds.

2. The assessee contended that the Assessing Officer had thoroughly examined the share capital and share application money, treating only the share premium as income. The Assessing Officer's decision was based on extensive inquiries and should not be considered erroneous unless against the law. The CIT's findings were deemed as an alternate opinion without cross-enquiry by the Assessing Officer.

3. The Department supported the revision order under section 263, citing a Tribunal order remitting the issue to the Assessing Officer with directions. The Tribunal had raised concerns about the investment decisions and the benefit passed on to shareholders/directors. The Tribunal directed the Assessing Officer to re-verify the funds and cash flow management for the relevant assessment years.

4. The Tribunal confirmed the CIT's order under section 263, directing the CIT(A) to examine the issue in line with the Tribunal's directions. The appeal of the assessee was dismissed, as the Assessing Officer had already passed the order based on the CIT's directions. The CIT(A) was directed to review the issue in line with the Tribunal's directions for the relevant assessment year.

In conclusion, the appellate tribunal upheld the CIT's order under section 263, directing further examination of the treatment of share premium as income. The case highlighted the importance of thorough assessment and verification of funds and transactions to ensure compliance with the Income Tax Act.