Sunray Cotspin (P) Ltd. v. Pr. CIT

Case Laws Analysis
REFERRED Micro Inks Ltd. v. Pr. CIT 2017 TaxPub(DT) 4368 (Guj-HC)
REFERRED CIT v. Nirav Modi 2016 TaxPub(DT) 3506 (Bom-HC)
REFERRED CIT v. Gabrial India Ltd. 1993 TaxPub(DT) 1357 (Bom-HC)

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The Tax Publishers2020 TaxPub(DT) 1849 (Del-Trib) : (2020) 079 ITR (Trib) 0193 IN THE ITAT, DELHI BENCH N.K. BILLAIYA, A.M. & SUCHITRA KAMBLE, J.M. Sunray Cotspin (P) Ltd. v. Pr. CIT I.T.A. No. 5239/Del/2019 A.Y. 2014-15 21 February, 2020 In favour of assessee. Assessee by: Gautam Jain, C.A Revenue by: H.K. Chaudhary, CIT-DR ORDER *N.K. Billaiya, A.M.* With this appeal the assessee has challenged the assumption of jurisdiction under section 263 of the Income Tax Act, 1961 [hereinafter referred to as 'the Act'] by the PCIT, Gurgaon for assessment year 2014-15. 2. The representatives of both the sides were heard at length. The case records carefully perused and with the assistance of the learned Counsel, we have considered the documentary evidences brought on record in the form of Paper Book in light of Rule 18(6) of ITAT Rules. Judicial decisions relied upon were carefully perused. 3. Facts on record show that the assessment was framed under section 143(3) of the Act vide Order, dated 18-8-2016. Assuming powers conferred upon him by provisions of section 263 of the Act, the PCIT served a notice which reads as under :-- GOVERNMENT OF INDIA MINISTRY OF FINANCE, DEPARTMENT OF REVENUE, OFFICE OF THE PR. COMMISSIONER OF INCOME TAX, HSIIDC BUILDING, VANIJYA NIKUNJ, UDYOG VIHAR, PHASE PHASE-V, GURGAON F.No. PCIT/GGN/TECH/263/78/2018-19/5391, dated 29-11-2018 To, The Principal Officer, M/s. Sunray Cotspin Pvt. Ltd., Plot No. 116, Udyog Vihar, Phase Phase-IV, Sir/Madam Subject: Notice under section 263 in case of M/s. Sunray Cotspin Pvt. Ltd. (PAN-AAPCS 2728 D) for assessment year 2014-15--Reg. The assessment in this case was completed under section 147/143(3) of the Income Tax Act vide Order, dated 18-8-2016 by the then assessing officer declaring a returned income of Rs. 12,350. 2. The assessment records of the above noted assessee for the assessment year 2014-15 were examined. On examination of the assessment records, following discrepancies are noticed. On the basis of discrepancies, it is observed that the assessment framed by the assessing officer under section 143(3) is erroneous and pre-judicial to the interest of revenue due to following reasons: 3. During the year under consideration, company had issued 1833300 shares @ Rs. 30 to various individual against the face value of Rs. 10 and has received share premium of Rs. 3,66,66,000. On perusal of assessment record it is noticed that no details w.r.t. the calculation of FMV as determined in accordance with the rule 11U and 11UA of the Income Tax Act, 1961 or otherwise, have been verified by the assessing officer and the above mentioned entities/persons have paid huge share premium of Rs. 3,66,66,000 which is not duly substantiated by their return of Income for the period under consideration. The assessing officer has failed to examine/verify with documents, the creditworthiness of M/s. Sunray Cotspin Pvt. Ltd. and no desired explanation about the nature and source of this share application money & share premium has been examined which is necessary for making assessment. 4. Hence, on perusal of assessment record, it was found that requisite inquiries were not conducted regarding the issue as to what prompted the subscribers to the shares to pay such substantial premium on shares of a little known company having no significant business activities. It is also observed that the assessment order has been passed without application of mind. A proper inquiry has also not been conducted regarding the identity and creditworthiness of the shareholders. It is observed that the order has been passed mechanically which turns the assessment erroneous and cause prejudice to the interest of service. 5. You are, therefore, provided an opportunity to show cause as to why assessment order passed by Income Tax Officer, Ward-4(3), dated 18-8-2016 for the assessment year 2014-15 in your case, should not be revised under section 263 of the Income Tax Act. You are therefore requested to attend my office on 10-12-2018 at 10.30 AM either in person or through representative duly authorized in writing on your behalf or produce or cause to be produced at the said time, any documents or any other evidence on which you rely in your support. SUBSCRIBE FOR FULL CONTENT

The Tax Publishers2020 TaxPub(DT) 1849 (Del-Trib) : (2020) 079 ITR (Trib) 0193

IN THE ITAT, DELHI BENCH

N.K. BILLAIYA, A.M. & SUCHITRA KAMBLE, J.M.

Sunray Cotspin (P) Ltd. v. Pr. CIT

I.T.A. No. 5239/Del/2019

A.Y. 2014-15

21 February, 2020

In favour of assessee.

Assessee by: Gautam Jain, C.A

Revenue by: H.K. Chaudhary, CIT-DR

ORDER

N.K. Billaiya, A.M.

With this appeal the assessee has challenged the assumption of jurisdiction under section 263 of the Income Tax Act, 1961 [hereinafter referred to as 'the Act'] by the PCIT, Gurgaon for assessment year 2014-15.

2. The representatives of both the sides were heard at length. The case records carefully perused and with the assistance of the learned Counsel, we have considered the documentary evidences brought on record in the form of Paper Book in light of Rule 18(6) of ITAT Rules. Judicial decisions relied upon were carefully perused.

3. Facts on record show that the assessment was framed under section 143(3) of the Act vide Order, dated 18-8-2016. Assuming powers conferred upon him by provisions of section 263 of the Act, the PCIT served a notice which reads as under :--

GOVERNMENT OF INDIA

MINISTRY OF FINANCE, DEPARTMENT OF REVENUE,

OFFICE OF THE PR. COMMISSIONER OF INCOME TAX,

HSIIDC BUILDING, VANIJYA NIKUNJ, UDYOG VIHAR, PHASE PHASE-V, GURGAON

F.No. PCIT/GGN/TECH/263/78/2018-19/5391, dated 29-11-2018

To,

The Principal Officer,

M/s. Sunray Cotspin Pvt. Ltd.,

Plot No. 116, Udyog Vihar, Phase Phase-IV,

Sir/Madam

Subject: Notice under section 263 in case of M/s. Sunray Cotspin Pvt. Ltd. (PAN-AAPCS 2728 D) for assessment year 2014-15--Reg.

The assessment in this case was completed under section 147/143(3) of the Income Tax Act vide Order, dated 18-8-2016 by the then assessing officer declaring a returned income of Rs. 12,350.

2. The assessment records of the above noted assessee for the assessment year 2014-15 were examined. On examination of the assessment records, following discrepancies are noticed. On the basis of discrepancies, it is observed that the assessment framed by the assessing officer under section 143(3) is erroneous and pre-judicial to the interest of revenue due to following reasons:

3. During the year under consideration, company had issued 1833300 shares @ Rs. 30 to various individual against the face value of Rs. 10 and has received share premium of Rs. 3,66,66,000.

On perusal of assessment record it is noticed that no details w.r.t. the calculation of FMV as determined in accordance with the rule 11U and 11UA of the Income Tax Act, 1961 or otherwise, have been verified by the assessing officer and the above mentioned entities/persons have paid huge share premium of Rs. 3,66,66,000 which is not duly substantiated by their return of Income for the period under consideration. The assessing officer has failed to examine/verify with documents, the creditworthiness of M/s. Sunray Cotspin Pvt. Ltd. and no desired explanation about the nature and source of this share application money & share premium has been examined which is necessary for making assessment.

4. Hence, on perusal of assessment record, it was found that requisite inquiries were not conducted regarding the issue as to what prompted the subscribers to the shares to pay such substantial premium on shares of a little known company having no significant business activities. It is also observed that the assessment order has been passed without application of mind. A proper inquiry has also not been conducted regarding the identity and creditworthiness of the shareholders. It is observed that the order has been passed mechanically which turns the assessment erroneous and cause prejudice to the interest of service.

5. You are, therefore, provided an opportunity to show cause as to why assessment order passed by Income Tax Officer, Ward-4(3), dated 18-8-2016 for the assessment year 2014-15 in your case, should not be revised under section 263 of the Income Tax Act. You are therefore requested to attend my office on 10-12-2018 at 10.30 AM either in person or through representative duly authorized in writing on your behalf or produce or cause to be produced at the said time, any documents or any other evidence on which you rely in your support.