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2022 (7) TMI 1298 - AT - Income TaxRevision u/s 263 - unexplained cash credit u/s.68 - addition towards share capital and share premium - addition of share premium of Re. 1/- per share contemplated by the ld. PCIT by assuming revision jurisdiction u/s.263 on the premise that assessee had not furnished any details either before the ld. AO or before him - HELD THAT - Addition in respect of face value of Rs.10/- per share on account of share capital has already been made by the ld. AO and the same is the subject matter of appeal before the ld.CIT(A) and it is pending. Hence, we do not want to give any finding or opinion on the veracity of the addition made u/s.68 of the Act in respect of face value of Rs.10/- per share. At the same time going by the documents filed by the assessee both before the ld. AO and before the ld. PCIT, which fact had been duly acknowledged by both the parties in their respective orders, we find that the ld. PCIT had erred in assuming revision jurisdiction u/s.263 in the instant case as it is based on the mistaken premise that assessee had not furnished any documents to prove the three ingredients of Section 68 and further on another mistaken premise that the AO had made addition after considering all the submissions of the assessee. Hence, it could be safely concluded that the entire assumption of jurisdiction by the ld. PCIT u/s.263 of the Act is based on incorrect assumption of fact. On this primary ground itself revision order u/s.263 passed by the ld. PCIT deserves to be quashed and is hereby quashed. - Decided in favour of assessee.
Issues Involved:
1. Justification of invoking revisionary jurisdiction under Section 263 of the Income Tax Act. 2. Direction to make an addition of Rs. 85,39,480/- by the Principal Commissioner of Income Tax (PCIT). Issue-wise Detailed Analysis: 1. Justification of Invoking Revisionary Jurisdiction under Section 263 of the Income Tax Act: The core issue in this appeal is whether the Principal Commissioner of Income Tax (PCIT) was justified in invoking the revisionary jurisdiction under Section 263 of the Income Tax Act. The assessee, a private limited company engaged in manufacturing insulation foam, had filed its return of income for the assessment year 2016-17, declaring a total loss of Rs. 2,00,51,836/-. During the scrutiny assessment, the Assessing Officer (AO) examined the allotment of shares to non-resident shareholders at Rs. 11/- per share, comprising a face value of Rs. 10/- and a premium of Re. 1 per share. The AO made an addition of Rs. 8,53,94,800/- under Section 68 of the Act, representing 85,39,480 shares at Rs. 10/- each, as unexplained cash credit. However, the premium component of Re. 1 per share was not taxed. The PCIT invoked revision jurisdiction under Section 263 to bring the premium component to tax, treating the AO's order as erroneous and prejudicial to the interest of the revenue. The assessee contended that it had provided all necessary documents to substantiate the identity, creditworthiness of the shareholders, and the genuineness of the transactions. These documents included bank statements, KYC documents, income tax returns, and valuation reports. The PCIT, however, directed the AO to tax the premium component of Rs. 46,03,578/- instead of Rs. 85,39,480/-, ignoring the assessee's contentions. The tribunal found that the PCIT did not independently apply his mind and relied on the AO's findings. The assessee had furnished detailed replies and supporting documents before both the AO and the PCIT. The tribunal concluded that the PCIT's assumption of jurisdiction under Section 263 was based on incorrect facts and quashed the revision order. 2. Direction to Make an Addition of Rs. 85,39,480/- by the Principal Commissioner of Income Tax (PCIT): The interconnected issue was whether the PCIT was justified in directing the AO to make an addition of Rs. 85,39,480/-. The assessee argued that the share premium was received from non-resident shareholders through the Foreign Direct Investment (FDI) route, compliant with the Foreign Exchange Management Act (FEMA) guidelines and approved by the Reserve Bank of India (RBI). The assessee provided all necessary documents, including share valuation reports, bank statements, and Foreign Inward Remittance Certificates (FIRC). The tribunal noted that the PCIT's direction to tax the premium component was based on the mistaken premise that the assessee had not furnished any details. The tribunal found that the PCIT had erred in assuming revision jurisdiction under Section 263, as the assessee had provided all necessary documents to prove the three ingredients of Section 68 of the Act. The tribunal held that the PCIT's order was based on an incorrect assumption of fact and quashed the revision order. Conclusion: The tribunal allowed the appeal of the assessee, quashing the revision order passed by the PCIT under Section 263 of the Income Tax Act. The tribunal held that the PCIT erred in invoking revisionary jurisdiction, as the assumption of jurisdiction was based on incorrect facts and the assessee had duly satisfied the necessary requirements under Section 68 of the Act.
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