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TMI Blog2023 (6) TMI 971X X X X Extracts X X X X X X X X Extracts X X X X ..... accepting the assessee s claim. Here is a case in which the assessee issued shares with face value of Rs. 10/- at a price of Rs. 6,526.96 per share. The shares were right issued to the existing shareholders. The assessee justified the receipt of share premium at this level with the help of report of a valuer. Such report was drawn on 05-12-2016, when the assessee issued shares at the same amount of premium in the immediately preceding assessment year 2017-18 to Indospace Ventures II, Mauritius. Assessment for the A.Y. 2017-18 was completed u/s. 143(3) without casting any doubt or aspersion over the reasonableness of the amount of premium charged on the shares. It is the same amount of premium which has been charged by the assessee during the year under consideration on fresh issue of shares within a gap of six months from the last issue of shares, that has been doubted by the ld. PCIT in the present case. We are satisfied that the PCIT was not justified in revising the assessment order passed u/s 143(3) of the Act. The revisionary order is hereby set aside and quashed. Appeal is allowed. - ITA No. 249/PUN/2023 - - - Dated:- 21-6-2023 - Shri R.S. Syal, Vice President And S ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ing the same in the assessment order. In his opinion, no analysis whatsoever was done on the submissions made by the assessee. He further observed that the valuation report of KCPL and Associates LLP contained value at Rs. 1,591.94 per share under the Net Asset Value Book value method and at Rs. 6,408.36 under the Discounted Free Cash Flow (DFCF) method. Such latter value was determined on the basis of projected cash flow for the period 01-10-2016 to 30-06-2018. He observed that the cash flow statement was based on the estimates provided by the assessee company. In his opinion, the AO did not verify the justification for excess share premium and there were no follow up queries. He, therefore, held the assessment order to be erroneous and prejudicial to the interest of the Revenue. Consequently, he set-aside the assessment order and directed the AO to frame the assessment afresh after applying his mind. Aggrieved thereby, the assessee has come up in appeal before the Tribunal. 3. We have heard the rival submissions and gone through the relevant material on record. The assessee issued right shares to its two existing shareholders, namely, Rohan Builders and Developers Pvt. Ltd. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... sessee also discussed applicability of section 56(2)(viib) on the issue of shares by the company by stating that this section applied only to the residents and not to the non-residents. In that view of the matter, the transaction with Indospace Ventures II, Mauritius was claimed to be outside the purview of section 56(2)(viib) of the Act. The assessee also placed on record computation of working of earning per share and share premium. All the necessary documents and evidence in this regard were enclosed with such letter. The assessee also submitted before the AO the valuation report submitted by KCPL and Associates LLP, whose copy is available at page 19 onwards of the paper book , computing the value of Equity shares of the company under NAV - Book Value method at Rs. 1,591.94 per share and under the DCFC method at Rs. 6,408.36 on the basis of projected cash flow statements for the period 01-01-2016 to 30- 06-2018. It is on the basis of such detailed submissions made before the AO that the Officer got convinced. After discussing the relevant issue in the assessment order, the AO did not choose to make any addition on this count. The ld. PCIT made out a case for revision on the gr ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... sing an assessment order at the threshold on the ground that the AO did not make proper verification in the first broad situation. However, in the second sub-situation of the second situation, where the assessee justifies his claim by filing necessary evidence and the AO, on examination of such evidence, gets satisfied and allows the claim after discussing the issue in the assessment order, the revision can be validly done only by pointing out distinctively where the AO went wrong in allowing the claim and how the action of the AO was erroneous and prejudicial to the interest of the Revenue. Revision in such circumstances cannot be ordered simply by saying that the AO failed to make proper enquiry and thereafter directing the AO to make necessary verification. Unlike the first situation, the Pr. CIT needs to expressly set up a case that the view taken by the AO was erroneous, which caused prejudice to the revenue. Simply saying that the AO did not apply his mind to the issue, without elaborating the flaws in the approach of the AO, does not clothe the Pr. CIT to revise the assessment order. 5. The ld. DR relied on the judgment in PCIT vs. Trimex Fiscal Service Pvt. Ltd. (2022) ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... assessee, whose copies have been placed on record. Then, at the end of the revisionary order, the ld. PCIT has reiterated the above incorrect assumption of fact: `The AO, while framing assessment, has failed to conduct enquiries to examine and verify the issues involved and the AO has failed to apply his mind and verify the issues involved . It is explicitly manifest that the ld. PCIT, except for harping on the fact that the AO did not make proper enquiry, which is factually incorrect, failed to specifically point out where the AO went awry, thereby failing the first jurisdictional condition of showing the assessment order to be erroneous. On the contrary, we are confronted with a situation in which the AO did make enquiry and the assessee also furnished replies along with the necessary evidence, which were duly examined by the AO before accepting the genuineness of the transaction. In such circumstances, it was incumbent upon the ld. PCIT to specifically point out where the AO went wrong in accepting the assessee s explanation. His action in generalizing the issue to the effect that the AO failed to make enquiry to examine and verify the reasonableness and genuineness of share pr ..... X X X X Extracts X X X X X X X X Extracts X X X X
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