2024 (1) TMI 208 - HC - Income Tax

Revision u/s 263 - Issue of shares at premium - assessee had issued 28,729 shares to two closely held companies - PCIT s view that valuation, as required u/s 56(2) (viib) had not been carried out - whether the AO had carried out an enquiry with regard to the shares issued at a premium to Experience and Sankalp - Tribunal concluded that the PCIT s view that the AO had not made an enquiry about the shares issued to Experience and Sankalp at high premium, was flawed. HELD THAT - According to us, the Tribunal has returned findings of fact with regard to the enquiry made. As is evident from the impugned order, notices were issued to assessee and explanations were sought with regard to the issuance of shares at high premium. Inter alia, the explanation given by assessee was that the high premium was paid by Experience and Sankalp, having regard to the underlying asset that the assessee had, which was the immovable property located at Prithviraj Road. According to the respondent/assessee (as computed by the registered valuer), the worth of the said property was pegged at Rs. 17.5 Crores. In our view, having regard to the findings of fact returned by the Tribunal, it is abundantly clear that an enquiry was, indeed, made by the AO with regard to the subject shares being issued at high premium. This was not a case of no enquiry. The PCIT, in our opinion, had committed an error in exercising the powers under Section 263 of the Act. No substantial question of law arises for consideration. Decided in favour of assessee.

Summary

Issues:
1. Condonation of delay in filing the appeal.
2. Challenge to the order passed by the Tribunal regarding assessment for AY 2014-15.

Condonation of Delay in Filing the Appeal:
An application was filed seeking condonation of a 164-day delay in filing the appeal. The appellant's counsel argued that there was actually no delay as a previous appeal had been withdrawn for the filing of a fresh appeal. The Tribunal's order in a miscellaneous application (MA) was crucial in determining the absence of delay. The court, intending to hear the appeal on merits, accepted the explanation provided by the appellant's counsel and allowed the appeal, condoning the delay.

Challenge to Tribunal's Order for AY 2014-15:
The appellant challenged the Tribunal's order dated 10.11.2021 concerning Assessment Year (AY) 2014-15. The appellant had previously filed a MA for the recall of this order, which was dismissed on 03.02.2023. The core issue revolved around the valuation of shares issued at a premium to two companies. The Principal Commissioner of Income Tax (PCIT) contended that the Assessing Officer (AO) had not properly examined the valuation, leading to a tax liability under Section 56 of the Income Tax Act. However, the Tribunal, after detailed examination, found that the AO had indeed conducted a thorough enquiry into the valuation of shares. Consequently, the Tribunal held that the PCIT's order was unsustainable. The court, concurring with the Tribunal's findings, concluded that no substantial question of law arose, and thus closed the appeal.