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TMI Blog2021 (12) TMI 1133X X X X Extracts X X X X X X X X Extracts X X X X ..... sessing Officer had called for report of valuation of shares given by Chartered Accountant goes to show that Assessing Officer had enquired and had gone into issues of applicability of provisions of section 56(2)(viib) . In the present case, from the observation made by the ld. PCIT in 263 order, it is clear that had the ld. PCIT appraised the report of valuation of shares placed before the Assessing Officer, he would not have accepted the valuation report. This observation, in our considered opinion, cannot be accepted in view of the fact that the power of revision u/s 263 does not allow for supplanting or substituting the view of the Assessing Officer. The appreciation of material placed before the Assessing Officer is exclusively within his domain which cannot be interdicted by a superior officer while exercising powers u/s 263 of the Act on the ground that if he had appraised the said material, he would have come to a different conclusion in view of the law laid down by the Hon ble Supreme Court in the case of Parashuram Pottery Works Co. Ltd.[ 1976 (11) TMI 1 - SUPREME COURT] . valuation of shares is a technical, complex problem, which should be left to the consideratio ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... proper enquiries during the course of asst. proceedings. 2.1] The learned CIT failed to appreciate that the learned A.O. had called for the relevant documents relating to the receipt of share premium by the assessee company and after due verification of all the details, the claim of the assessee was accepted and accordingly, there was no reason to set aside the asst. order on this issue. 2.2] The learned CIT erred in not appreciating that the share premium received by the assessee was in accordance with the provisions of section 56(2)(viib) and no addition was warranted on this issue and hence, there was no reason to set aside the asst. order for reverifying the details relating to this issue. 3] The learned CIT erred in setting aside the asst. order with respect to the claim of expenditure of ₹ 1,74,46,083/- on the ground that the same was allowed by the learned A.O. without proper verification and application of mind. 3.1] The learned CIT erred in not appreciating that the issue regarding claim of expenditure was allowed by the A.O. after due application of mind and hence, there was no question of setting aside the asst. on the ground that the claim ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ce of expenditure of ₹ 1,74,46,083/- came to be allowed even without offering corresponding income to tax. Hence, the ld. PCIT considered the assessment order dated 30.03.2016 passed u/s 143(3) is erroneous and prejudicial to the interest of the revenue and, accordingly, issued a showcause notice dated 05.02.2018 u/s 263 proposing to review assessment order. In response to the said show-cause notice dated 05.02.2018, the appellant company vide its letters dated 14.03.2018 and 19.03.2018 filed detailed explanation as to how the assessment order cannot be termed as erroneous contending that the appellant had followed one of the prescribed methods i.e. Discounted Cash Flow Method and the net worth of value of share is computed at ₹ 22,568/- following the Discounted Cash Flow Method. He also submitted that the Assessing Officer had conducted the requisite enquiries took view that provision of section 56(2)(viib) have no application. 6. However, the ld. PCIT considering the contents of the report of valuation of shares furnished by the Chartered Accountant, namely, Sachin R. Bansal Co. dated 26.09.2012 observed that : (i) The valuation report was prepared by the C ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 3 of the Paper Book. Thus, it is submitted that the finding of the ld. PCIT that no enquiry was made by the Assessing Officer as to the valuation of equity shares is contrary to the material on record. The ld. AR further submitted that when the Income Tax Rules gives an option to adopt one of method of valuation of shares, either Fair Market Value of the shares or Discounted Cash Flow Method of the shares. The Assessing Officer cannot substitute his own method in place of method adopted by the assessee. 11. According to the ld. AR, the Assessing Officer had rightly accepted the method adopted by the assessee and the ld. PCIT cannot term the assessment order as erroneous merely because in the opinion of the ld. PCIT, the appellant should have adopted Fair Market Value for the purpose of valuation of the shares. It is also further submitted that the ld. PCIT cannot disregard the valuation report of shares furnished by the Chartered Accountant citing that the valuation report was furnished by the Chartered Accountant based on the information furnished by the assessee company. The valuation report furnished by the Chartered Accountant cannot be tinkered with by the ld. PCIT, as th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... g reliance on the decision of the Hon ble Supreme Court in the case of PCIT vs. Shreeji Prints (P.) Ltd., 130 taxmann.com 294 (SC). 14. It is also contended that valuation of preference or equity shares cannot be termed as an excessive in view of the fact that the assessee company issued 1120 equity shares of face value of ₹ 10 per share to ICICI Asset Management Company Ltd. at a premium of ₹ 24,140/- per share and received share premium of ₹ 2,70,36,800/- and the provisions of section 56(2)(viib) has no application in the case of genuine transactions as there is no allegation of money laundering and illegality of consideration received on allotment of shares placing reliance on the decision of Mumbai Bench of the Tribunal in the case of Freedom Wealth Solutions Pvt. Ltd. vs. ITO in ITA No.7000/Mum/2019 order dated 22.09.2021. Thus, it was contended that the ld. PCIT was not justified in exercising the power of revision u/s 263 of the Act and prayed for quashing of the order passed u/s 263 of the Act and in directing the Assessing Officer to make an enquiry into the issue of share premium and applicability of provisions of section 56(2)(viib) of the Act. 15 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... der sheet entry as well as the notices issued u/s 143(2), it would reveal that the Assessing Officer had enquired into the issue sought to be revised by the ld. PCIT. Therefore, it cannot be said that there is total lack of enquiry on the part of the Assessing Officer. As a matter of fact, it was specifically brought to the notice of the Assessing Officer that the appellant company issued 47850 preference shares of face value of ₹ 10 per share at premium to M/s. Kumar Sinew Developers Pvt. Ltd., a sister concern of the appellant and received a share premium aggregating to sum of ₹ 24,95,37,750/-. The appellant company also issued 1120 equity shares of face value of ₹ 10 per share to ICICI Asset Management Company Ltd. at a premium of ₹ 24,140/- per share and received share premium of ₹ 2,70,36,800/- and report of valuation of shares given by the Chartered Accountant was also furnished. In these circumstances, we do not agree with the ld. CIT-DR that no enquiry was made into the issue of receipt of share premium and the very fact that the Assessing Officer had called for report of valuation of shares given by Chartered Accountant goes to show that Asses ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ra), law on this aspect was discussed in the following manner : . . . From a reading of sub-section (1) of section 263, it is clear that the power of suo motu revision can be exercised by the Commissioner only if, on examination of the records of any proceedings under this Act, he considers that any order passed therein by the Income-tax Officer is 'erroneous insofar as it is prejudicial to the interests of the revenue'. It is not an arbitrary or unchartered power. It can be exercised only on fulfilment of the requirements laid down in sub-section (1). The consideration of the Commissioner as to whether an order is erroneous insofar as it is prejudicial to the interests of the revenue must be based on materials on the record of the proceedings called for by him. If there are no materials on record on the basis of which it can be said that the Commissioner acting in a reasonable manner could have come to such a conclusion, the very initiation of proceedings by him will be illegal and without jurisdiction. The Commissioner cannot initiate proceedings with a view to starting fishing and roving enquiries in matters or orders which are already concluded. Such action will ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... was on the lower side and left to the Commissioner he would have estimated the income at a figure higher than the one determined by the Income-tax Officer. That would not vest the Commissioner with power to reexamine the accounts and determine the income himself at a higher figure. It is because the Income-tax Officer has exercised the quasi-judicial power vested in him in accordance with law and arrived at conclusion and such a conclusion cannot be termed to be erroneous simply because the Commissioner does not feel satisfied with the conclusion. . . . There must be some prima facie material on record to show that tax which was lawfully exigible has not been imposed or that by the application of the relevant statute on an incorrect or incomplete interpretation a lesser tax than what was just has been imposed. ........ 20. The Commissioner of Income Tax cannot exercise the power of revision with a view to initiate fishing and roving enquiry in the matters and orders which are already concluded as held by the Hon ble Supreme Court in the case of Parashuram Pottery Works Co. Ltd. (supra). 21. Further, we are of opinion that valuation of shares is a technical, complex problem ..... X X X X Extracts X X X X X X X X Extracts X X X X
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