2024 (11) TMI 689 - AT - Income Tax

Revision u/s 263 - share premium received by the appellant - HELD THAT - From the examination of record it is crystal clear that appellant/assessee company has filed its return of income for the year 2014-15 on 01.11.2014 declaring an income - Assessment order dated 02.08.2016 mentions that the case was selected for limited scrutiny through CASS. As per notice assessee furnished required information and reply on the basis of which the return income was accepted and assessed on return income. PCIT vide orderset aside order and directed A.O. to pass an order afresh. Appeal of the assessee was dismissed by ITAT, Delhi. Hon ble High Court of Punjab and Haryana set aside order and remanded the matter back to PCIT to pass a well reasoned order. Learned PCIT issued notice under Section 263 of the Act. Assessee filed reply on 09.01.2024. PCIT after perusing balance sheet as on 31.03.2013 observed that the assessee received Rs. 2,64,10,000/- as share application money pending for share allotment during Financial Year 2012-13, however, no allotment of share was made during the Financial Year 2012-13. As per balance sheet as on 31.03.2014, the 2,11,280 share @ 125/- per share were issued to various parties against the face value of Rs. 10/- each and added/diverted Rs. 2,42,97,200/- as Securities Premium Reserve during the Financial Year 2013-14 relevant to Assessment Year 2014-15. As per ratio of judgment in Malabar Industrial Co. Ltd. 2000 (2) TMI 10 - SUPREME COURT and Sun Beam Auto Limited 2009 (9) TMI 633 - DELHI HIGH COURT it is well settled that where the AO passed an order after conducting necessary inquiry and on due application of mind, the CIT could not assume jurisdiction to revise such an order simply because the CIT wanted inquiries to be conducted in a particular manner or the CIT was of the opinion that some or more inquiries needed to be conducted. The issue regarding allotment of shares was examined by Ld. A.O. and decided in favour of assessee in original assessment proceedings. Learned PCIT failed to clarify as to how share premium received by assessee in year 2013-14 can be taken as escaped income to initiate re-assessment proceedings for Assessment Year 2014-15. PCIT had no where found any flaw in the documents. PCIT had not undertaken any enquiry or given reasons for coming to conclusion that assessment order was erroneous and prejudicial to interest of revenue. Explanation 2 to section 263 of the act does not give unfettered power to Ld. PCIT to revise each and every order to re-examine the issues already examined by the AO during assessment proceedings. Therefore, the impugned order is beyond jurisdiction, bad in law and void ab initio. Appeal of the Assessee is allowed.

Summary

Issues:
1. Jurisdiction of PCIT under Section 263 of the Income Tax Act.
2. Validity of setting aside the assessment order and directing a fresh assessment.
3. Compliance with legal principles in initiating reassessment proceedings.
4. Interpretation of share premium received by the assessee in the context of escaped income.
5. Application of legal precedents in the assessment process.

Analysis:

1. The appeal challenged an order under Section 263 of the Income Tax Act, where the PCIT set aside the assessment order and directed a fresh assessment. The case involved the jurisdiction of the PCIT to revise the order and the legality of initiating reassessment proceedings.

2. The PCIT's decision was based on the observation that the assessee received share application money in a previous financial year but did not allot shares until the subsequent year. The PCIT raised concerns about the share premium received by the assessee and its treatment as escaped income for the assessment year in question.

3. The authorized representative for the assessee argued that the PCIT failed to provide sufficient reasons or basis for considering the share premium as escaped income. The representative cited legal precedents emphasizing the necessity for the PCIT to establish errors in the original assessment order before invoking Section 263.

4. The judgment highlighted the importance of the Assessing Officer conducting necessary inquiries and applying due diligence before the PCIT can revise the order. The PCIT's failure to identify any flaws in the original assessment or provide adequate reasoning for deeming the assessment order erroneous led to the conclusion that the PCIT exceeded its jurisdiction.

5. Ultimately, the Tribunal found in favor of the assessee, setting aside the PCIT's order and allowing the appeal. The decision was based on the lack of substantive grounds for revising the assessment order and the failure to comply with legal principles and precedents in initiating reassessment proceedings.

This detailed analysis of the judgment provides insights into the legal issues surrounding the PCIT's jurisdiction, the validity of reassessment proceedings, and the application of legal principles in tax assessments.