2024 (3) TMI 209 - AT - Income Tax

Revision u/s 263 - Addition invoking of provisions of section 68 in respect of share premium received by the assessee - HELD THAT - Both the parties herein fairly conceded that these orders are passed by the lower authorities before passing of the judgement by Hon ble Supreme Court in assessee s own case 2022 (1) TMI 774 - SUPREME COURT which have full bearing on the decision of ld. AO in these assessment years wherein held admittedly, every one of the investors procured shares of the company in liquidation and each shareholder had a representative in the board of directors. Since the board controlled the company, the directors were guilty of the conduct of the affairs of the company in a fraudulent manner. Since each shareholder had a representative in the board, the shareholders had to take the blame for the misdeeds of the directors; Additionally, the shareholders were fully aware of the fact that the application for approval dated 02.02.2006 to the FIPB was for ISP services. But they entered into a Share Subscription Agreement on 06.03.2006 for Devas services. The Share Subscription Agreement discloses that they were aware of the false statements contained in the Agreement dated 28.01.2005. Therefore, the shareholders, who now want to reap the fruits of a tree, fraudulently planted and unlawfully nurtured, cannot feign ignorance and escape the allegations of fraud. As above findings of Hon ble Supreme Court is having great bearing on the decision of lower authorities in these assessment years since the said judgement of Hon ble Supreme Court was delivered subsequent to the decision of the lower authorities and as such, it is appropriate to remit the entire issue to the file of ld. AO for de-novo consideration.

Summary

Issues Involved:
1. Transfer Pricing Adjustments
2. Addition towards Corporate Tax
3. Invoking of Revisionary Jurisdiction under Section 263
4. Invoking Provisions of Section 68 regarding Share Premium

Summary:

Transfer Pricing Adjustments and Addition towards Corporate Tax:
The assessee, engaged in Satellite Multimedia Services, challenged the Transfer Pricing adjustments and additions towards corporate tax for the assessment years 2007-08, 2008-09, 2010-11, 2011-12, 2012-13, 2013-14, and 2014-15. The Tribunal noted that the lower authorities' orders were passed before the Supreme Court's judgment in the assessee's own case (Civil Appeal No.5766 of 2021 dated 17.01.2022). The Supreme Court found no perversity in the findings of the NCLT and NCLAT, which were based on undisputed documents and facts. The Tribunal decided to remit these issues back to the Assessing Officer for de-novo consideration in light of the Supreme Court's judgment.

Invoking of Revisionary Jurisdiction under Section 263:
For the assessment year 2009-10 (ITA No.158/Bang/2020), the assessee challenged the order of the Principal Commissioner of Income Tax (PCIT) passed under Section 263 of the Income Tax Act, 1961. The PCIT had remitted the issue to the Assessing Officer to verify the creditworthiness of the shareholders and the valuation of the shares regarding the share premium received by the assessee. Since the Tribunal remitted various issues in dispute for the assessment year 2009-10 back to the Assessing Officer for de-novo consideration, the order passed by the PCIT under Section 263 was deemed infructuous. Consequently, the appeal for this year was dismissed as infructuous.

Conclusion:
The appeals related to Transfer Pricing adjustments and corporate tax additions for the assessment years 2007-08, 2008-09, 2010-11, 2011-12, 2012-13, 2013-14, and 2014-15 were partly allowed for statistical purposes and remitted back to the Assessing Officer for de-novo consideration. The appeal for the assessment year 2009-10 was dismissed as infructuous due to the remittance of related issues for de-novo consideration.