Taxation of funds received in the form of share premium

IN THE INCOME TAX APPELLATE TRIBUNAL, JAIPUR BENCHES "B", JAIPUR
BEFORE SHRI SANDEEP GOSAIN, JM & SHRI VIKRAM SINGH YADAV, AM

ITA No. 09/JP/2021
Assessment Year: 2016-17

Annu Agrotech Private Limited,
S-47/48, S-47/48,
Commercial Shops, IPIA 324005,
Rajasthan, India.
Appellant

Vs.
Pr.CIT,
Udaipur.
Respondent

PAN No.: AAGCA5903M

Assessee by : Shri Mahendra Gargieya(Adv.) & Shri Devang Gargieya (ITP)
Revenue by : Shri B.K. Gupta (Pr.CIT-DR)

Date of Hearing: 27/07/2021
Date of Pronouncement: 15 /09/2021

PER: SANDEEP GOSAIN, J.M.

The present appeal has been filed by the assessee against the order of the ld. Pr.CIT, Udaipur dated 11/02/2021 passed U/s 263 of the Income Tax Act, 1961 (in short, the Act) for the A.Y. 2016-17. The assessee has raised following grounds of appeal:

"1. The Ld. Pr. CIT, seriously erred in law as well as on the facts of the case in invoking the provisions of Sec. 263 of the Act and therefore, the impugned order dated 11.02.2021 u/s 263 of the Act kindly be quashed.

2. The ld. Pr. CIT seriously erred in law as well as on the facts of the case in assuming jurisdiction u/s 263 of the Act without recording a specific and categorical finding that the subjected assessment order passed u/s 143(3) dated 16.11.2018 is erroneous and prejudicial to the interest of the revenue, in absence of which the entire proceedings u/s 263 is vitiated. Therefore, the impugned order dated 11.02.2021 u/s 263 of the Act kindly be quashed.

3. The ld. Pr. CIT seriously erred in law as well as on the facts of the case in assuming jurisdiction u/s 263 of the Act by wrongly and incorrectly holding that the subjected assessment order u/s 143(3) dated 16.11.2018, was passed without making proper enquiries or verification w.r.t.:

(a) Allotment of 1,80,000 shares of Face Value @ Rs. 10/- with premium @ Rs. 50/- per share for total consideration of Rs. 1.08 Crore u/s 68 proviso and,

(b) Receipt of large share premium u/s 56(2)(vii) and any other relevant section of the Act.

with a direction to the AO to properly examine the identity (typed as entities) 85 creditworthiness of the shareholders/investors and also genuineness of the transactions and also to examine applicability of S. 56(2)(viib) of large share premium and any other relevant section of the Act and also to make necessary additions to the total income or u/s 115JB(1) of the Act, wherever required.

The assumption of jurisdiction u/s 263 and the directions so given there under, being contrary to the provisions of law and facts on record hence, the proceedings initiated u/s 263 of the Act and the impugned order dated 11.02.2021 deserves to be quashed.

4. The ld. Pr. CIT erred in law as well as on the facts of the case in wrongly setting aside the assessment order dated 16.11.2018 despite there being complete application of mind by the AO on the subjected issues and it was nothing but a case of change of opinion, based on which, assumption of jurisdiction u/s 263 is not permissible. The impugned order dated 11.02.2021 therefore, lacks valid jurisdiction u/s 263 of the Act and hence, the same kindly be quashed.

5. The ld. Pr. CIT seriously erred in law as well as on the facts of the case in assuming jurisdiction u/s 263 of the Act by wrongly and incorrectly invoking Explanation 2 to S. 263 as if the same conferred unbridled power upon the CIT even though the facts and circumstances of the case did not justify the application of the said Explanation.

6. Alternatively and without prejudice to the above The ld. Pr. CIT erred in law as well on the facts of the case in holding that the consideration received by the appellant company on issue of shares was in excess of the Fair Market Value by Rs. 3,11,400/- hence, is required to be added to the total income u/s 56(2)(viib) of the Act.

Hence, the impugned finding that the assessment order passed u/s 143(3) 16.11.2018 was erroneous and prejudicial to the interest of the revenue to the extent of short assessment of Rs. 3,11,400/-, deserves to be completely quashed and set-aside.

7. The appellant prays your honor indulgences to add, amend or alter of or any of the grounds of the appeal on or before the date of hearing."

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