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TMI Blog2023 (3) TMI 261X X X X Extracts X X X X X X X X Extracts X X X X ..... under consideration during the assessment proceedings was only confined to the disallowance of interest expenses on debentures, therefore, we are of the considered view that revision proceedings under section 263 have correctly been initiated in respect of this issue. Accordingly, to this extent, the impugned order passed u/s 263 is upheld. Applicability of section 79 - As held that the assessee has diluted shareholding in respect of major shareholder vis- -vis the preceding years in which loss was incurred, and thus as per section 79 he assessee is not entitled to carry forward earlier years brought forward losses, which was allowed by the AO. Since no enquiry in this regard, which was warranted in the facts and circumstances of the case, was made by the AO resulting in the assessment order to be erroneous insofar as prejudicial to the interest of the Revenue. During the hearing, Tribunal in Khajrana Ganesh Properties Pvt Ltd. [ 2017 (9) TMI 1726 - ITAT MUMBAI] and Instant Traders Private Limited [ 2018 (9) TMI 211 - ITAT MUMBAI] wherein it has been held that the issue whether the loss in the year may be carried forward to following year and set off against the income of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... assessment order dated 20.12.2019 passed u/s 143(3) of the Act on the ground that order is erroneous in so far as it is prejudicial to the interest of the revenue. 2. On the facts and in circumstances of the case and in law, the Learned PCIT has erred in directing the Assessing Officer to pass a fresh assessment order after giving due opportunity to the assessee in respect to - (a) disallow interest of Rs. 7,73,29,874/- u/s 36(1)(iii) of the Act, (b) deny carry forward of losses pertaining to AY 2014-15 and 2016-17 amounting to Rs. 24,96,63,568/- u/s 79 of the Act, (c) consider share premium of Rs. 3,50,00,000/- as income u/s 56(2)(viib) of the Act. 3. The appellant craves leave to add, alter, amend and/or rescind any grounds of appeal during the course of the hearing. 3. The only grievance of the assessee is against the revision order passed by learned PCIT under section 263 of the Act. 4. The brief facts of the case as emanating from record are: The assessee is a company and is engaged in the business of power and energy. For the year under consideration, the assessee filed its return of income on 06/11/2017, declaring a total loss of Rs.50,37,76 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... could not reply to the notice issued under section 263 of the Act as no notice was received by it. As regards the merits, the learned AR by referring to the various documents forming part of the paper book submitted that the Assessing Officer, during the assessment proceedings, had examined all the aspects and after considering the submissions of the assessee passed the assessment order. The learned AR submitted that the mere absence of discussion in the assessment order will not render it to be erroneous insofar as it is prejudicial to the interest of Revenue. 8. On the contrary, the learned Departmental Representative ( learned DR ) submitted that the queries raised by the Assessing Officer during the assessment proceedings were in respect of other issues, and the issues highlighted in the impugned order were not examined by the Assessing Officer. The learned DR further submitted that there is no discussion/analysis in the assessment order on the basis of which it can be held that the Assessing Officer after due application of mind accepted the plea of the assessee on the issues raised in the impugned order. The learned DR submitted that the Assessing Officer has not examined ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... far it is prejudicial to the interest of revenue. 10. During the hearing, learned AR by referring to the annual accounts on page 13 of the paper book submitted that during the year, the assessee debited finance cost of Rs.44,89,91,398 in its profit and loss account. The learned AR referred to the breakup of finance cost on page 50 of the paper book, which includes interest to bank, interest on debentures, interest to others and bank charges. Learned AR submitted that during the year the assessee capitalised expenditure of Rs.13,35,03,728, under section 36(1)(iii) of the Act, and disallowed the same while filing its return of income. By referring to the show cause notice dated 12/12/2019, on pages no.106-107 of the paper book, learned AR submitted that a specific query was raised by the Assessing Officer regarding disallowance of interest expenses on debentures of Rs.83,32,313. In reply thereto, the assessee vide submission dated 20/12/2019, on pages no.108-110 of the paper book, submitted that the assessee company has already capitalised the interest cost till the date of put to use and accordingly disallowed Rs.13,25,03,730, under section 36(1)(iii) of the Act. The learned AR ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the other components of expenditure during the assessment proceedings. The assessee has also not brought on record any show cause notice issued by the Assessing Officer on this issue. Since the issue under consideration during the assessment proceedings was only confined to the disallowance of interest expenses on debentures, therefore, we are of the considered view that revision proceedings under section 263 of the Act have correctly been initiated in respect of this issue. Accordingly, to this extent, the impugned order passed under section 263 of the Act is upheld. 12. The 2nd issue raised in the impugned order is pertaining to the applicability of section 79 of the Act. Vide impugned order, inter-alia, it was held that the assessee has diluted shareholding in respect of major shareholder vis- -vis the preceding years in which loss was incurred, and thus as per section 79 of the Act the assessee is not entitled to carry forward earlier years brought forward losses, which was allowed by the Assessing Officer. Since no enquiry in this regard, which was warranted in the facts and circumstances of the case, was made by the Assessing Officer resulting in the assessment order to b ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the earlier years. Vide another notice dated 09/12/2019 issued under section 142(1) of the Act, forming part of the paper book from pages no.115-116, the Assessing Officer, during the assessment proceedings, raised a specific query regarding the change in shareholding pattern by 51% or more and accordingly, asked the assessee to show cause as to why the carry forward of brought forward losses by the assessee be not disallowed. We find that vide its submission dated 17/12/2019, forming part of the paper book from pages no.117-119, the assessee submitted the reasons for the change in shareholding pattern during the year and also made submissions regarding non-applicability of section 79 to the facts of the present case. From the perusal of the notices issued by the Assessing Officer and the reply filed by the assessee, we find that this issue was specifically raised during the scrutiny assessment proceedings and the same was duly replied to by the assessee. Therefore, it cannot be concluded that this aspect was not examined by the Assessing Officer. We find that the Hon ble jurisdictional High Court in CIT vs Reliance Communication Ltd, [2016] 69 taxmann.com 103 (Bombay) held that t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... considered in excess of the fair market value of the share as per the provisions of section 56(2)(vii)(b) of the Act. Since no enquiry in this regard, which was warranted in the facts and circumstances of the case, was made by the Assessing Officer resulting in the assessment order to be erroneous insofar as prejudicial to the interest of the Revenue. The relevant findings of the learned PCIT, vide impugned order, are as under:- 5.3. It is seen from the record, the assessee has issued 17500000 equity shares, each having value of Rs.12 with FV of Rs. 10/share to M/s. Prism Cement Ltd. and received share premium of Rs.35000000/-. During the year, the assessee has transferred 46746430 equity shares to banks as loan repayment by valuing Rs.5.37/share. The details transactions are mentioned below: Sr. No. Name of Bank Equity Share Issued No. Of Shares Rate (Rs./Share) 1 Allahabad Bank 70890400 13201192 5.3699 2. United Bank of India 4 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... is evident from page No. 236 of the paper book. From the perusal of the valuation report, on page 243-244 of the paper book, we find that the auditor determined the net asset value per share of the assessee at Rs.13.24. During the hearing, the learned AR submitted that the aforesaid valuation was as per the provisional financial statement, and even as per the final financial statement, the net asset value per share of the assessee is Rs.11.92 per share, which were issued to M/s Prism Cement Ltd at a premium of Rs.2 per share with the face value of Rs.10 per share. However, we find that it is not the claim of the learned PCIT that the shares were issued at price higher than the valuation as per the final financial statement, and rather the price at which shares were issued to the banks was taken as the fair market value by the learned PCIT. 17. As noted elsewhere, the assessee vide its submission dated 17/12/2019 filed before the Assessing Officer explained the change in shareholding pattern during the year by 51% or more. We find that in the said submission the assessee submitted that as it was facing severe difficulties in repayment of existing loans due to the reasons, like (a ..... X X X X Extracts X X X X X X X X Extracts X X X X
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