The Tax Publishers2019 TaxPub(DT) 2411 (Del-Trib)

INCOME TAX ACT, 1961

Section 263 Section 143(3) Section 115JB

Where no enquiry/verification was made by AO in relation to capital gains disclosed as exempt under section 10(38) and valuation of shares to show loss, was erroneous as well as prejudicial to interest of revenue as AO failed to examine the computational effect under section 115JB and assessee had not filed Form No. 29B before the AO or before Pr. CIT or before the Tribunal.

Revision under section 263 - Erroneous and prejudicial order - Lack of enquiry by AO -

Assessee had sold 1 crore shares of M/s. HCL Tech on 4-5-2012 at the rate of Rs. 500 per share approximately and the net value realized was Rs. 498 crores approximately. The purchase cost of these shares was shown as Rs. 6.50 crores and the difference of Rs. 491.70 crores approx was claimed/treated as exempt under section 10(38). However, the assessee-company had revalued the shares of M/s. HCL Tech on 1-4-2012 and on the basis of valuation reports the share was re-valued at Rs. 790 per share. The assessee in the books of account changed the cost of these shares to Rs. 790 per share. The assessee stated that this was done in order to restate the book (fair value) of the shares at its fair market value and accordingly shown the long-term capital loss of Rs. 291.82 crores. AO had failed to consider the applicability of proviso to section 10(38) and also section 115JB and accordingly had not questioned/inquired about the assessee's claim for not offering its LTCG for MAT purpose under section 115JB. CIT revised the assessment order based on independent inquiries holding it erroneous in so far as prejudicial to the interest of revenue and directed the AO to frame the assessment order afresh. Held: AO had not raised any query to the assessee on the aspect of taxability of the Book Profit under section 115JB. There had to be a premium over the market value of the share. By enhancing the value of the controlling interest of the shares as on 1-4-2012 at Rs. 798 per share instead of Rs. 501.25 per share, the sales of the shares and the fair market value of the shares would have been almost equal. Thereby the book loss shown by the assessee would have been the Book Profit under section 115JB. No Form No. 29B had been filed by the assessee before the AO or before the Principal CIT, which itself speaks that the AO had not conducted any enquiry with respect to the computation of Book Profit under section 115JB. Even before Tribunal Form No. 29B was not filed. Therefore, Tribunal concurred with the views of the Principal CIT that according to the Explanation (2) of section 263 the order passed by the AO was erroneous so far as it was prejudicial to the interest of the revenue.

Distinguished:Malabar Industrial Co. Ltd. v. CIT (2000) 243 ITR 83 (SC) : 2000 TaxPub(DT) 1227 (SC), CIT v. Max India Ltd. (2004) 268 ITR 128 (P&H) : 2004 TaxPub(DT) 1666 (P&H-HC), (2007) 295 ITR 282 (SC) : 2007 TaxPub(DT) 1548 (SC), CIT v. Kwality Steel Suppliers Complex (2017) 395 ITR 1 (SC) : 2017 TaxPub(DT) 1821 (SC), CIT v. Amitabh Bachchan (2016) 384 ITR 200 (SC) : 2016 TaxPub(DT) 2291 (SC), CIT v. Hindustan Lever Ltd. (2012) 343 ITR 161 (Bom) : 2012 TaxPub(DT) 1715 (Bom-HC), CIT v. Vikas Polymers (2010) 341 ITR 537 (Del) : 2010 TaxPub(DT) 2189 (Del-HC), CIT v. Sunbeam Auto Ltd. (2011) 332 ITR 167 (Del) : 2011 TaxPub(DT) 0088 (Del-HC), CIT v. Development Credit Bank Ltd. (2010) 323 ITR 206 (Bom) : 2010 TaxPub(DT) 1600 (Bom-HC), Vimgi Investment (P) Limited (2007) 290 ITR 505 (Del) : 2007 TaxPub(DT) 1009 (Del-HC), Hari Iron Trading Co. v. CIT (2003) 263 ITR 437 (P&H) : 2003 TaxPub(DT) 1304 (P&H-HC), CIT v. Gabriel India Limited (1993) 203 ITR 108 (Bom) : 1993 TaxPub(DT) 1357 (Bom-HC), CIT v. Eicher Limited (2007) 294 ITR 310 (Del HC) : 2007 TaxPub(DT) 1255 (Del-HC), CIT v. Kelvinator of India Ltd. (2010) 320 ITR 561 (SC) : 2010 TaxPub(DT) 1335 (SC), CIT v. Anil Kumar Sharma (2010) 335 ITR 83 (Del) : 2010 TaxPub(DT) 1573 (Del-HC), CIT v. Goyal Private Family Specific Trust (1988) 171 ITR 698 (All) : 1988 TaxPub(DT) 0738 (All-HC), CIT v. Sunbeam Auto Ltd. (2011) 332 ITR 167 (Del) : 2011 TaxPub(DT) 0088 (Del-HC), CIT v. Vodafone Essar (2013) 212 Taxman 184 (Del) : 2013 TaxPub(DT) 0367 (Del-HC), CIT v. Hindustan Lever Ltd. (2012) 343 ITR 161 (Bom): 2012 TaxPub(DT) 1715 (Bom-HC), Apollo Tyres Ltd. v. CIT (2002) 255 ITR 273 (SC) : 2002 TaxPub(DT) 1371 (SC), Malayala Manorama Co. Ltd. v. CIT (2008) 216 CTR 102 (SC) : 2008 TaxPub(DT) 1900 (SC), CIT v. HCL Comnet Systems & Services Ltd. (2008) 305 ITR 409 (SC) : 2008 TaxPub(DT) 2312 (SC), CIT v. Sona Woollen Mills P. Ltd. (2008) 300 ITR 202 (P&H) : 2008 TaxPub(DT) 0371 (P&H-HC), Kinetic Motor Co. Ltd. 262 ITR 340 (Bom), CIT v. Rubamin (P) Ltd. (2009) 218 CTR 162 (Guj) : 2009 TaxPub(DT) 0629 (Guj-HC), Dy. CIT v. Farmson Pharmaceuticals Gujarat Ltd. (2012) 241 CTR 568 (Guj) : 2012 TaxPub(DT) 0444 (Guj-HC), Cairn India Ltd. v. Dy. CIT 87 Taxmann.com 28 (Del) : 2017 TaxPub(DT) 4459 (Del-Trib), Hindalco Industries Limited 151 Comp Cases 446 (Bom) : 2010 TaxPub(CL) 0124 (Bom), and Western Alliance Power Limited Company Petition No. 12 of 2011 passed vide order dt. 22-3-2011 (Guj), Bisleri Sales Ltd. (2016) 66 taxmann.com 364 (Bom) : 2015 TaxPub(DT) 3816 (Bom-HC), National Hydroelectric Power Corpn. Ltd. v. CIT (2010) 320 ITR 374 (SC) : 2010 TaxPub(DT) 1267 (SC), ITO v. United Estate Pvt. Ltd. 51 SOT 61, CIT v. Stads Ltd. (2015) 61 Taxmann.com 33 (Mad) : 2015 TaxPub(DT) 1570 (Mad-HC), ITO v. Shreyans Investments (P.) Ltd. (2013) 31 Taxmann.com 11 (Kol) : 2013 TaxPub(DT) 1099 (Kol-Trib), ITO v. Kyal Developers (P.) Ltd. 42 Taxmann.com 70 (Kol), Richvik Enterprises Private v. DIT ITA No. 389/Kol/2012 (Kol), Sadanand S. Varde v. State of Maharashtra (2001) 247 ITR 609 (Bom) : 2001 TaxPub(DT) 0078 (Bom-HC), Wood Polymer Ltd., In re 109 ITR 177 (Guj), Vodafone Essar Gujarat Ltd. v. DIT 35 Taxmann.com 397 (Guj), Eastern Investment Ltd. v. ITO (1951)20 ITR 1 (SC) : 1951 TaxPub(DT) 0110 (SC), Union of India & Anr. v. Azadi Bachao Andolan & Anr. (2003) 263 ITR 706 (SC) : 2003 TaxPub(DT) 1429 (SC), Dharmayug Investments Ltd. v. ACIT 69 SOT 433 : 2015 TaxPub(DT) 2491 (Mum-Trib), Pr. CIT v. Indian Farmers & Fertilizers Co-operative Ltd. ITA No. 597/2017 (Del-HC), Narayan Tatu Rane v. ITO (2016) 70 Taxmann.com 227 (Mum-Trib) : 2016 TaxPub(DT) 2516 (Mum-Trib), CIT v. DLF Ltd. (2013) 350 ITR 555 (Del) : 2013 TaxPub(DT) 0340 (Del-HC), CIT v. Sunbeam Auto Ltd. (2011) 332 ITR 167 (Del) : 2011 TaxPub(DT) 0088 (Del-HC), CIT v. International Travel House (2010) 344 ITR 554 (Del) : 2010 TaxPub(DT) 2245 (Del-HC), CIT v. Vikas Polymers (2010) 341 ITR 537 (Del) : 2010 TaxPub(DT) 2189 (Del-HC), Gulmohar Finances Ltd. 170 Taxman 483 (Del) : 2008 TaxPub(DT) 1721 (Del-HC), Fab India Overseas v. CIT 244 CTR 380 (Del) : 2011 TaxPub(DT) 2092 (Del-HC), CIT v. Ratlam Coal Ash Co. (1988)171 ITR 141 (MP) : 1988 TaxPub(DT) 0529 (MP-HC), CIT v. Ganpat Ram Bishonoi (2008) 152 Taxman 242 (Raj) : 2008 TaxPub(DT) 0132, (Raj-HC), CIT v. Mehrotra Brothers (2004) 270 ITR 157 (MP) : 2004 TaxPub(DT) 0443 (MP-HC), CIT v. Associated Food Profits (P) Ltd. (2006) 280 ITR 377 (MP) : 2006 TaxPub(DT) 0971 (MP-HC), Gail India Ltd. v. CIT ITA No. 2577/Del/2004 (Del-Trib), Amira Enterprises Ltd. v. Pr. CIT in ITA No. 3206/Del/2017 (Del-Trib), Torrent Pharmaceuticals Ltd. v. Dy. CIT ITA No.164 of 2018 (Ahd-Trib), Shri Narasimha Reddy Peechu v. ITO ITA No. 932 of 2017 (Hyd-Trib), Asstt. CIT v. TVS Motors Co. Ltd. (2011) 8 Taxmann.com 288 (Chn) : 2011 TaxPub(DT) 0041 (Chen-Trib), Purbanchal Power Co. Ltd. v. DIT ITA No. 201/Kol/20100 (Kol) : 2014 TaxPub(DT) 3537 (Kol-Trib), Cairn India Ltd. v. Dy. CIT (2017) 87 Taxmann.com 28 (Del-Trib) : 2017 TaxPub(DT) 4459 (Del-Trib).

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