9911796707
TMI Blog2023 (3) TMI 261X X X X Extracts X X X X X X X X Extracts X X X X ..... s 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.50,37,76,622. Subsequently, the assessee filed a revised return of income on 31/10/2019, declaring a total loss of Rs.55,74,26,854. The assessee's case was selected for scrutiny and statutory notices under section 143(2) and section 142(1) of the Act were issued and duly ser ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ings, 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 the applicability of various provisions of the Act and concluded the assessment at the returned loss. Thus, no enquiry was made by the Assessing Officer, and even if some enquiry was made, the same was not as per law and therefore, the same cannot be said to be a proper enqu ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... d 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 submitted that in this regard the assessee also filed the detailed working of the aforesaid disallowance under section 36(1)(iii) of the Act. On the contrary, the learned DR submitted that the only query raised by the Assessing Officer was pertaining to disallowance of debenture e ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... llowance 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-à-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 be erroneous insofar as prejudicial to the interest of the Revenue. The relevant findings of the learned PCIT, vide impugned order, are as under:- "5.2 The assessee has claimed brought forward losses of Rs.6,05,78,105/- pertaining to AY 2014-15 and Rs. 18,90,85,463/- for AY 201 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 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 the fact that the Assessing Officer did not make any reference in the assessment order cannot make the order erroneous when the issues were indeed looked into. 14. During the hearing, the learned DR placed reliance upon the decisions of Hon'ble jurisdictional High Court in CIT vs Bal ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 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 44858760 8353587 5.3699 3. Andhra Bank 17571980 3272250 5.3699 4. Corporation Bank 58765730 10943339 5.3699 5. Bank of India 58941450 10976062 53699 TOTAL:- 251028320 46746430 Since the assessee has accepted the price of Rs.5.37share, this price can be considered as fair market value of the share and thus premium of Rs.3,50,00,000/- received by the assessee from Prism Cement Ltd. is to be considered in excess of fair market value of the share as per provision of the sec ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ubmission 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) lower sales realisation due to reduced power sale traffic, (b) higher fuel cost due to take over of coal mine, (c) lack of adequate working capital, the lender banks as per the guidelines issued by RBI agreed to structure the existing loan under the Scheme of Sustainable Structuring of Stressed Assets, whereby the promoter shareholding was diluted by issuing shares to the banks. Under the aforesaid scheme, one of the requirements was that the loan given by the lender banks are to be converted into equity shares/preference shares and part of promoter shares were also to be transferred to the lender bank. In pursuance of the above scheme, the assessee company, during the year, converted the existing loan given by the banks into equity shares. Accordingly, the shares were issued to banks, namely, Allahabad Bank, Bank of India, Corporation Bank, Union Bank of India and Andhra Bank. We find t ..... X X X X Extracts X X X X X X X X Extracts X X X X
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