ANJANI AGARWAL,KOLKATA V. PCIT (CENTRAL) KOLKATA - 2, , KOLKATA

ITA 403/KOL/2025

AI Insights

The case revolves around an appeal by Anjani Agarwal against the revisionary order of the PCIT, which challenged the assessment made by the AO under section 143(3) of the Income-tax Act, 1961. The PCIT contended that the AO had under-assessed the income by not considering the fair market value of shares purchased by the assessee, leading to a loss of revenue. However, the Tribunal found that the AO had adequately investigated the matter during the assessment proceedings and had accepted the assessee's explanations, thus not warranting a revision under section 263.

• Counselvise Citation: [2025] 140 COUNSELVISE.COM (IT) 784737 (ITAT-KOLKATA)
• Duration Of Justice: 8 month(s) 17 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 11-11-2025
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: A
• Assessment Year: 2021-2022
• Appeal Filed On: 25-02-2025
• Other Referred Cases: Malabar Industrial Co. Ltd. Vs. CIT, JL Morison (India) Ltd. Vs. ACIT, Principal Commissioner of Income-tax vs. Britannia Industries Ltd., Commissioner of Income-tax vs. Sunbeam Auto Ltd., PCIT Vs V. Con Integrated Solutions (P) Ltd, CIT Vs Max India Ltd., Ultratech Cement Ltd Vs State of Rajasthan
• Laws Referred To: Income-tax Act, 1961
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: RAJA SENGUPTA
• Assessee Lawyers: S. K. TULSIYAN
• Keywords: Fair market value; Assessment record; Revision of order
• Section: 143(3); 142(1); 263

Judgement Text

" IN THE INCOME TAX APPELLATE TRIBUNAL “A” BENCH, KOLKATA BEFORE SHRI DUVVURU RL REDDY, VP AND SHRI RAJESH KUMAR, AM ITA No.403/KOL/2025 (Assessment Year: 2021-22) Anjani Agarwal 1D, Ashoka, 14, Ashoka Road, Alipore H.O. Kolkata-700027, West Bengal Vs. PCIT (Central) Kolkata-2, DCIT, Central Circle-4(3), Aayakar Bhawan Poorva, 110, Shantipally, Kolkata- 700107, West Bengal (Appellant) (Respondent) PAN No. AEHPA0038H Assessee by : Shri S.K. Tulsiyan, AR Revenue by : Shri Raja Sengupta, DR Date of hearing: 21.08.2025 Date of pronouncement: 11.11.2025 O R D E R Per Rajesh Kumar, AM: This is an appeal preferred by the assessee against the revisionary order of the ld. Pr. Commissioner of Income Tax(hereinafter referred to as the “Ld. PCIT”] dated 24.01.2025 for the AY 2021-22. 02. The only issue raised by the assessee in the various grounds of appeal is against the invalid exercise of jurisdiction u/s 263 of the Act by the ld PCIT and consequently, order passed by the ld. PCIT u/s 263 of the Act was also invalid and nullity in the eyes of law. 03. The facts in brief are that the ld. AO framed the assessment u/s 143(3) of the Income-tax Act, 1961 (the Act) on 29.12.223, assessing the total income at ₹12,13,10,290/- as against the NIL income declared by the assessee. According to ld. PCIT, the order passed by the ld. AO u/s Printed from counselvise.com Page | 2 ITA No.403/KOL/2025 Anjani Agarwal; A.Y. 2021-22 143(3) is erroneous and prejudicial to the interest of the Revenue on the ground that the assessee Smt. Anjani Agarwal had purchased 1,95,500 equity shares of M/s Ankit Polyfabs Pvt. Ltd. for a consideration of ₹1,86,76,115/-, whereas the market value of the shares in terms of Provision of Section 56(2)(x)(c) of the Act, was ₹4,78,54,490/- and thereby the ld. AO has under assessed the income to the extent of ₹2,91,78,375/- in the assessment framed u/s 143(3) of the Act. Accordingly, the notice u/s 263 of the Act was issued to the assessee to show cause as to why the assessment framed by the ld. AO u/s 143(3) of the Act should not revised, which was replied by the assessee vide submission dated 26.11.2024, as well as on 04.12.2024, wherein it was submitted that the issue was raised by the AO and verified during the assessment proceedings and only after taking into account the submissions/ explanations of the assessee no addition was made in the assessment framed. However, the reply of the assessee did not find favour with the ld. PCIT and he accordingly revised the assessment with a direction to frame the same denovo after affording reasonable opportunity of hearing to the assessee. 04. The ld. AR vehemently submitted before us that the ld. PCIT has invalidly invoked jurisdiction u/s 263 of the Act to revise the assessment by mis-construing the facts qua the valuation of shares. The ld. AR submitted that during the year the assessee acquired the share of M/s Ankit Polyfabs Pvt. Ltd. to the tune of 1,95,500/- for a consideration of ₹1,86,76,115/- meaning thereby that the shares were purchased at ₹95.53 per share. The ld. AR submitted that according to ld. PCIT, the value of per share was Rs. 244.78. the ld. AR submitted that the ld. PCIT has wrongly taken the total assets of the assessee company at ₹12,17,80,199/- for calculation of fair market value of the shares which was incorrect as he had taken the total assets from the consolidated balance sheet of the said company by considering the Printed from counselvise.com Page | 3 ITA No.403/KOL/2025 Anjani Agarwal; A.Y. 2021-22 assets of the associated/ subsidiary concerns of the assessee instead of standalone balance sheet of the company. The ld. AR submitted the total assets of M/s Ankit Polyfabs Pvt. Ltd. was ₹4,75,03,712/- and total subscribed share were 4,97,500 and thus, the fair market value of each shares were worked out at ₹95.48. Whereas, the shares were allotted to the assessee at a price of 95.53 which was more than fair market value. The ld. AR therefore prayed that the assessee has purchased shares of M/s Ankit Polyfabs Pvt. Ltd. at a price higher than the fair market value and hence, the provisions of Section 56(2)(x)(c) of the Act were not applicable and therefore, provisions of Section 263 of the Act were wrongly invoked. 05. The ld. AR also referred to the notice issued by the ld. AO u/s 142(1) of the Act on 13.11.2023 along with detailed questionnaire and at point no.26, the ld. AO specifically asked about the unlisted equity shares acquired by the assessee and called for the necessary details in respect thereof. The ld. AR submitted that the assessee filed point wise reply vide submission dated 27.12.2023, a copy whereof is available at paper book. The ld. AR submitted that in Para no.14 in the written submissions , the assessee submitted details of purchase of shares, bills for the said transaction for purchase of shares made, payments and market value of the company whose unlisted shares were purchased. The AR therefore submitted that only after considering the reply of the assessee, the AO accepted the contentions/explanation of the assessee with regard to valuation of equity shares and no addition was made u/s 56(2)(x)(c) of the Act. The ld AR argued that the ld. AO had made a detailed enquiry during the course of assessment proceedings and therefore, the assessment order is neither erroneous nor prejudicial to the interest of the Revenue. The ld AR argued that the jurisdiction u/s 263 is only available if the twin conditions are satisfied. The ld. AR in defense of his argument relied on the decision of Malabar Industrial Co. Printed from counselvise.com Page | 4 ITA No.403/KOL/2025 Anjani Agarwal; A.Y. 2021-22 Ltd. Vs. CIT (2000) 243 ITR 83 (SC). The ld. AR further submitted where the ld. AO has taken a plausible view then it cannot be said that view taken by the ld. AO is erroneous as the ld. PCIT does not agree with the view taken by the ld. AO and according to ld. PCIT another view should be taken by the ld. AO. In other words, the ld. PCIT by invoking the provisions of Section 263 of the Act cannot substitute his own view in place of the view taken by the ld. AO. The ld. AR in defense of his argument relied on the decision of JL Morison (India) Ltd. Vs. ACIT in ITA No.786/Kol/2010, which has been upheld by the Hon'ble Jurisdiction High Court as reported in Commissioner of Income-tax, Central - I, KolKata vs. J. L. Morrison (India) Ltd. [2014] 366 ITR 593 (Calcutta) dated 15-05-2014. The ld. AR also relied on the decision of Principal Commissioner of Income-tax vs. Britannia Industries Ltd. [2023] 146 taxmann.com 246 (Calcutta)[25-08-2022], Commissioner of Income- tax vs. Sunbeam Auto Ltd. [2011] 332 ITR 167 (Delhi), PCIT Vs V. Con Integrated Solutions (P) Ltd (2025) 173 taxmann.com 773(P&H) which has been affirmed by the Hon,ble Apex Court in PCIT Vs V. Con Integrated Solutions (P) Ltd (2025) 173 taxmann.com 774(SC) by dismissing the SLP filed by the Revenue. Similarly the ld AR also relied on the decisions of Hon’ble Apex Court namely CIT Vs Max India Ltd. (2008) 295 ITR 282(SC) and Ultratech Cement Ltd Vs State of Rajasthan (2020) 117 taxmann.com 807(SC) to defend his arguments that where the AO has taken one view of the two possible view with which the ld PCIT does not agree even then the assessment order can not be treated as erroneous in so far as prejudicial to the interest of the revenue. 06. The ld. DR on the other hand relied heavily on the order of ld. PCIT by submitting that the fair market value of the share has to be determined on the basis of consolidated balance sheet and not on the basis of stand- alone balance sheet of the assessee and therefore, the revisionary Printed from counselvise.com Page | 5 ITA No.403/KOL/2025 Anjani Agarwal; A.Y. 2021-22 proceedings were validly invoked and may kindly be upheld by dismissing the appeal of the assessee. 07. We have heard the rival contentions and perused the materials available on record. The undisputed facts are that the assessee has been allotted 1,95,500/- equity shares of M/s Ankit Polyfabs Pvt. during the year for total consideration of ₹1,86,76,115/-. The fair market value of the shares was determined on the basis of total assets as on 31.03.2021 as per the balance sheet (standalone basis), which were ₹4,75,03,712/- and by dividing by total number of share subscribed 4,97,500/- which comes to ₹95.48 per share. However, the shares were issued to the assessee at a price of ₹95.53, which is higher than the fair market value as calculated above and therefore, the provisions of Section 56(2)(x)(c) of the Act are not applicable. In this case the assessment was framed u/s 143(3) of the Act vide order dated 29.12.2023. We note that during the course of assessment proceedings, notice was issued by the ld. AO u/s 142(1) of the Act dated 13.11.2023 calling upon the assessee to furnish various details including the details of share purchases during the year specifically in point no.26, the issue was raised by the ld. AO. The said question was replied by the assessee during the assessment proceedings by furnishing all the details and the ld. AO framed the assessment accepting the submissions of the assessee and no addition was made u/s 56(2)(x)(c) of the Act qua the purchase of shares by the assessee . However, the ld. PCIT on perusal of the assessment record noted that the fair market value of the shares should have been ₹244.78. The ld. PCIT determined the market value of shares on the basis of total assets as per the consolidated balance sheet which were ₹12,17,18,199/- and not on the basis of standalone balance sheet. The ld. PCIT included in the total assets for the purpose of valuation , the assets belonging to associates and subsidiary companies which in our opinion is wrong and can not be accepted. In our opinion, the order Printed from counselvise.com Page | 6 ITA No.403/KOL/2025 Anjani Agarwal; A.Y. 2021-22 passed by the ld. AO after calling for the information from the ld. AO and taking them into account and accepting the explanation given by the assessee appears to be correct and as per the provisions of the Act. In our opinion, the order passed by the ld. AO is neither erroneous nor prejudicial to the interest of the Revenue. Therefore, the provisions invoked u/s 263 of the Act is invalidly invoked and cannot be sustained. In our opinion, the order passed by the learned AO is in accordance with law and does not suffer any infirmity, illegality or otherwise. Therefore, the order passed by the learned AO cannot be said to be erroneous in so far as prejudicial to the interest of the Revenue. In our considered view the jurisdiction u/s 263 of the Act was invalidly invoked. In order to invoke the jurisdiction u/s 263 of the Act the assessment has to be erroneous and prejudicial to the interest of the revenue. Both the conditions are to be satisified simultaneously and even if one of the two conditions is satisfied , the jurisdicition u/s 263 of the Act is not available to the ld PCIT. The case of the assessee find support from the decision of Hon'ble Apex Court in the case of Malabar industrial Co. Vs CIT Ltd. (supra), wherein it has been held as under:- \" that to exercise of jurisdiction by the Commissioner suo moto under the provisions of Section 263 of the Act, he has to be satisfied of twin conditions, namely (1) the order of the Assessing Officer sought to be revised is erroneous; and (ii) it is prejudicial to the interests of the revemie. If one of them is absentif the order of the Income Tax Officer is erroneous but is not prejudicial to the revenue or if it is not erroneous but is prejudicial to the revenue recourse can not be had to Section 263(1) of the Act\" In the same case it has also been held that \"The phrase 'prejudicial to the interests of the revenue' has to read in conjunction with an erroneous order passed by the Assessing Officer. Every loss of revenue as a consequence of an order of the Assessing Officer, cannot be treated as prejudicial to the interest of the revenue, for example, when an Income Tax Officer adoptedon of the courses permissible in law and it has resulted in loss of revenue, or where two views are possible and the Income Tax Officer has taken one view with which the Commissioner does not agree, it cannot be treated as an erroneous order prejudicial to the interests of the Revenue unless the view taken by the Income Tax Officer is unsustainable in law.” Printed from counselvise.com Page | 7 ITA No.403/KOL/2025 Anjani Agarwal; A.Y. 2021-22 08. In our opinion, once the learned AO has carried out investigation into the issue and has not made any addition then it can be presumed that he has accepted the plea and stand of the assessee. The PCIT has to prove that the assessment framed by the AO is wrong as there was failure to investigate . In our opinion the PCIT has to record the abject failure and lapse on the part of the assessee which rendered the assessment as erroneous and prejudicial to the interest of the revenue and not otherwise. The case of the assessee is squarely covered by the decision of Hon'ble Apex Court in the case of M/s V-Con Integrated Solutions Pvt. Ltd(supra), wherein it has been held as under:- \"2.The assessee does not have control over the pen of the Assessing Officer. Once the Assessing Officer carries out the investigation but does not make any addition, it can be taken that he accepts the plea and stand of the assessee. 3.In such cases, it would be wrong to say that the Revenue is remediless. The power under Section 263 of the Income Tax Act, 1961, can be exercised by the Commissioner of Income Tax, but by going into the merits and making an addition, and not by way of a remand, recording that there was failure to investigate. There is a distinction between the failure or absence of investigation and a wrong decision/conclusion. A wrong decision/conclusion can be corrected by the Commissioner of Income Tax with a decision on merits and by making an addition or disallowance. 4.There may be cases where the Assessing Officer undertakes a superficial and random investigation that may justify a remit, albeit the Commissioner of Income Tax must record the abject failure and lapse on the part of the Assessing Officer to establish both the error and the prejudice caused to the Revenue. Recording the aforesaid, the special leave petition is dismissed.\"” 09. Similarly, where the learned AO has taken a plausible view of one of the two possible views even then the order passed by the learned AO cannot be said to be erroneous and prejudicial to the interest of the Revenue unless the view taken by the ITO is not in accordance with law or contrary to the facts on record. The case of the assessee find support from the decision of the Hon'ble Apex Court in the case of Max India Ltd. (supra) and Ultratech Cement Ltd. Vs State of Rajasthan (supra) where two view existed and AO has taken one view, it can not Printed from counselvise.com Page | 8 ITA No.403/KOL/2025 Anjani Agarwal; A.Y. 2021-22 said erroneous order prejudicial to the interest of the Revenue unless the view taken by the AO is unsustainable in law. Similarly the jurisdiction is not available to the PCIT even in case of inadequate enquiry. It is only lack of enquiry which gives jurisdiction to PCIT to invoke the revisionary jurisdiction u/s 263 of the Act. 010. Considering the facts of the above case, in the light of ratio laid down in the decisions above, we are of the considered view that the jurisdiction u/s 263 was invalidly invoked by the ld. PCIT. Accordingly, we are inclined to quash the order passed u/s 263 of the Act. 011. In the result, the appeal of the assessee is allowed. Order pronounced in the open court on 11.11.2025. Sd/- Sd/- (DUVVURU RL REDDY) (RAJESH KUMAR) (JUDICIAL MEMBER) (ACCOUNTANT MEMBER) Kolkata, Dated: 11.11.2025 Sudip Sarkar, Sr.PS Copy of the Order forwarded to: BY ORDER, True Copy// Sr. Private Secretary/ Asst. Registrar Income Tax Appellate Tribunal, Kolkata 1. The Appellant 2. The Respondent 3. CIT 4. DR, ITAT, 5. Guard file. Printed from counselvise.com "