M/s Ruchi J Oil Pvt Ltd , Mumbai V. PCIT(A)Ujjain, Ujjain

ITA 176/Ind/2020

• Counselvise Citation: [2021] 108 COUNSELVISE.COM (IT) 8802 (ITAT-INDORE)
• Duration Of Justice: 9 month(s) 5 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 25-03-2021
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: DB
• Assessment Year: 2014-2015
• Appeal Filed On: 19-06-2020
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: S S MANTRI
• Assessee Lawyers: P D NAGAR
• Keywords: Transfer pricing; Opportunity of being heard; Principle of natural justice; International transaction; Question of law; Fair market value; Valuation report; Assessment record; Prejudicial to interest; Set aside
• Section: 143(3); 92B; 142(1); 56(2); 143(1); 143(2); 64; 13; 22; 92CA; 263; 63

Judgement Text

, , IN THE INCOME TAX APPELLATE TRIBUNAL INDORE BENCH, INDORE BEFORE HON'BLE KUL BHARAT, JUDICIAL MEMBER AND HON'BLE MANISH BORAD, ACCOUNTANT MEMBER ITA NO.176/IND/2020 ASSESSMENT YEAR 2014-15 APPELLANT BY SHRI P.D. NAGAR , CA RESPONDENT BY SHRI S.S. MANTRI, CIT DATE OF HEARING: 10 . 0 3 .20 2 1 DATE OF PRONOUNCEMENT: 25 .0 3 .2021 / O R D E R PER MANISH BORAD: THE ABOVE CAPTIONED APPEAL FILED AT THE INSTANCE O F THE OFFICIAL LIQUIDATOR OF THE ASSESSEE COMPANY PERTAINING TO AS SESSMENT YEAR 2014-15 IS DIRECTED AGAINST THE ORDERS OF LD. PRINC IPAL COMMISSIONER OF INCOME TAX (IN SHORT LD. PCIT], UJ JAIN DATED 25.03.2020 FRAMED U/S 263 OF THE ACT. M/S. RUCHI J OIL PVT. LTD, C/O P.D. NAGAR & CO, CHARTERED ACCOUNTANTS, 403, CITY PLAZA, 564 M.G. ROAD, INDORE VS. P CIT , UJJAIN (APPELLANT) (REVENUE ) PAN: AAGCR4475D M/S RUCHI J OIL PVT. LTD ITA NO.176/IND/2020 2 2. ASSESSEE HAS RAISED FOLLOWING GROUNDS OF APPEAL: - 1) THAT THE LD. PR. COMM. OF INCOME TAX ERRED IN LAW I N NOT APPRECIATING THE FACT THAT ISSUE OF SHARES AT A HIGHER PREMIUM T HAN THE VALUE DETERMINED AS PER RULE LLUA(2)(B) OF INCOME TAX RUL ES TO NON-RESIDENT FOREIGN COMPANIES WAS EXAMINED BY THE ACIT AND AFTE R PROPER APPLICATION OF MIND, HE DID NOT MAKE ANY ADDITION U/S 56(2)(VII B) OF THE ACT BECAUSE THE PROVISION OF SECTION 56(2)(VIIB) ARE NOT APPLIC ABLE TO NON-RESIDENT. AFTER PROPER ENQUIRIES, ASSESSMENT ORDER WAS PASSED U/S 143(3) OF THE ACT, NOT ONLY HAVING DETAILED DISCUSSION REGARDING ISSUE OF SHARE AT A PREMIUM BUT ALSO AFTER REFINING THE MATTER TO TPO. THEREFORE, T HE ORDER CANNOT BE SAID TO BE ERRONEOUS AND PREJUDICIAL TO THE INTEREST OF REV ENUE BECAUSE THE AO DID NOT COMMIT ANY ERROR, WHATSOEVER, BY IGNORING THE P ROVISIONS CONTAINED IN SECTION 56(2)(VIIB) OF THE ACT WHILE COMPLETING THE ASSESSMENT, AS ALLEGED. 2.THAT THE LD. PR. COMM. OF INCOME TAX ERRED IN LAW IN NOT CONSIDERING, VITAL FACT THAT THE PROVISIONS OF SECTION 56(2)(VII B) OF THE ACT ARE APPLICABLE ONLY IN CASE WHERE CONSIDERATION AGAINST ISSUE OF S HARES IS RECEIVED FROM ANY PERSON BEING A RESIDENT AS REPRODUCED HEREUNDER :- 'WHERE A COMPANY, NOT BEING A COMPANY IN WHICH TILE PUBLIC ARE SUBSTANTIALLY INTERESTED, RECEIVES, IN ANY PREVIOUS YEAR, FROM ANY PERSON BEING A RESIDENT, ANY CONSIDERATION FOR ISSUE OF SH ARES THAT EXCEEDS THE FACE VALUE OF SUCH SHARES, TILE AGGREGATE CONSIDERA TION RECEIVED FOR SUCH SHARES AS EXCEEDS TILE FAIR MARKET VALUE OF THE SHA RES'. BOTH THE COMPANIES TO WHOM EQUITY SHARES WERE ISSUE D AT A PREMIUM WERE NON-RESIDENT COMPANIES AS PROVED BEYOND DOUBT FROM REMITTANCES RECEIVED FROM FOREIGN COMPANIES THROUGH THEIR BANKS DULY INTIMATED TO RBI M/S RUCHI J OIL PVT. LTD ITA NO.176/IND/2020 3 THROUGH HDFC BANK. ID. PR. COMM. OF INCOME TAX INVO KED THE' PROVISIONS OF SEC. 263 OF THE ACT BECAUSE THERE WAS NO DISCUSS ION REGARDING APPLICABILITY OF PROVISIONS OF SECTION 56(2)(VIIB) OF THE ACT IN THE ASSESSMENT ORDER. THE ASSESSMENT ORDER WAS NEITHER ERRONEOUS N OR PREJUDICIAL TO THE INTEREST OF REVENUE BECAUSE PROVISIONS OF SECTION 5 6(2)(VIIB) OF THE ACT WERE NOT AT ALL APPLICABLE IN RELATION TO SHARES ISSUED TO ANY NON-RESIDENT AT A PREMIUM BY ANY COMPANY, HENCE ORDER PASSED U/S. 263 OF THE ACT, DESERVES TO BE QUASHED. 03. THE APPELLANT FURTHER CRAVES LEAVE TO ADD, ALTE R, AND/OR TO AMEND THE AFORESAID GROUNDS OF APPEAL AS AND WHEN NECESSARY. 3. BRIEF FACTS OF THE CASE AS CULLED OUT FROM THE R ECORDS ARE THAT THE ASSESSEE IS A PRIVATE LIMITED COMPANY ENGAGED I N THE BUSINESS OF MANUFACTURING AND PROCESSING OF SOYA OIL . LOSS OF RS. 4,14,66,430/- DECLARED IN THE INCOME TAX RETURN E FILED ON 25.11.2014. CASE SELECTED FOR SCRUTINY UNDER CASS FOLLOWED BY SERVING OF NOTICES U/S 143(2) AND 143(1) OF THE ACT. DURING THE ASSESSMENT PROCEEDINGS VARIOUS INFORMATION WERE CAL LED BY THE LD. A.O. THE ONE WHICH IS RELEVANT FOR THE INSTANT APP EAL IS WITH REGARD TO ISSUING EQUITY SHARES TO TWO NON RESIDENT COMPAN IES NAMELY M/S TOYOTA TSUSHO CORPORATION, JAPAN AND M/S. J OIL MILLS INC, M/S RUCHI J OIL PVT. LTD ITA NO.176/IND/2020 4 JAPAN. BOTH THESE COMPANIES MADE FOREIGN DIRECT IN VESTMENT FOR ACQUIRING 92000 AND 104000 EQUITY SHARES RESPECTIVE LY OF FACE VALUE OF RS.10/- PER SHARE AND SHARE PREMIUM PER SH ARE OF RS.2830.68. SINCE IN VIEW OF THE LD. A.O THESE TRA NSACTION WERE INTERNATIONAL TRANSACTION HE MADE A REFERENCE TO TH E JURISDICTIONAL TRANSFER PRICING OFFICER (IN SHORT LD.TPO) U/S 92CA(1) OF THE ACT FOR THE COMPUTATION OF ARMS LENGTH PRICE. LD. TPO CALLED FOR THE NECESSARY INFORMATION AFTER ISSUING NOTICE U/S 92CA (2) OF THE ACT AND WAS OF THE VIEW THAT NO ADJUSTMENT IS REQUIRED TO BE MADE TO THE ARMS LENGTH PRICE OF THE TRANSACTION. AFTER RE CEIVING THE ORDER OF LD. TPO ASSESSMENT U/S 143(3) R.W.S. 92CA(3) OF THE ACT WAS COMPLETED BY LD. A.O ON 27.12.2017 ACCEPTING THE RE TURNED INCOME OF THE ASSESSEE AFTER THOROUGHLY DISCUSSING ALL THE ISSUES INCLUDING THE INSTANT ISSUE OF ISSUE OF SHARE CAPITAL TO TWO NON RESIDENT COMPANIES (DISCUSSED IN PARA 6 OF THE ASSESSMENT OR DER FROM PAGE 7 TO 12). M/S RUCHI J OIL PVT. LTD ITA NO.176/IND/2020 5 4. SUBSEQUENTLY LD. PR. CIT INVOKING THE POWER U/S 263 OF THE ACT CALLED FOR THE ASSESSMENT RECORDS AND AFTER GOI NG THROUGH THE SAME ISSUED FOLLOWING SHOW CAUSE NOTICE DATED 19.02 .2020 TO THE ASSESSEE:- IN THIS CASE, THE ASSESSEE FILED RETURN OF INCOME F OR THE AY 2014-15 ON 25.11.2014 DECLARING TOTAL LOSS OF RS.4,14,66,430/ -. THE CASE WAS SELECTED FOR SCRUTINY THROUGH CASS. THE ASSESSMENT WAS COMPLETED U/S 143(3)/92CA(3) 29.11.2017 BY THE AO (ACIT-2(1), UJ JAIN] AT THE TOTAL ASSESSED LOSS AND DECLARED IN THE RETURN OF INCOME , WHICH IS CONSIDERED ERRONEOUS AND PREJUDICIAL TO THE INTEREST OF REVEN UE FOR THE FOLLOWING REASONS:- ON PERUSAL AND EXAMINATION OF RECORDS, IT IS NOTIC ED THAT ASSESSEE COMPANY ISSUED TOTAL NUMBER OF SHARES 4,00,000 @10 PER SHARE FACE VALUE AND SHARE PREMIUM RECEIVED FOR RS.95,27,75,180/- O N 3,90,000 SHARES. FURTHER IT IS NOTICED THAT THE ASSESSEE COMPANY F URNISHED THE SHARE VALUATION REPORT OF M/S SSPA & CO, CA FOR VALUATIO N OF SHARES AS ON DATE OF ISSUE ON DISCOUNTED CASH FLOW (DCF) METHOD AND VALUED SHARE AT RS.2061.35 PER SHARE. THE ASSESSEE COMPANY RECEIVE D SHARE PREMIUM FOR RS.95,27,75,180/- ON 3,90,000 SHARES AGAINST S HARE PREMIUM VALUED ON THE BASIS OF DCF METHOD FOR RS.80,39,26,500/-, RESULTING EXCESS SHARE PREMIUM RECEIVED FOR RS.14,88,48,680/- AS DETAILED BELOW:- M/S RUCHI J OIL PVT. LTD ITA NO.176/IND/2020 6 SL.NO. NAME OF SHARE NO. OF TOTAL SHARE PREMIUM TOTAL VALUE OF SHARE TOTAL SHARE EXCESS SHARE HOLDER SHARES PER SHARE PREMIUM PREMIUM PREMIUM PREMIUM RECEIVED RECEIVED PER SHARE PER SHARE 1 RUCHI SOYA 204000 2051.35 367961900 2061.35 399901900 (-)1940 000 INDUSTRIES LTD 2 J OIL MILLS 104000 2830.68 294390720 2061.35 214380400 80 010320 3 TOYOTA TSUSHO 92000 2830.68 260422560 2061.35 189644200 7077836 0 TOTAL 39000-0 952775180 803 926500 148848680 THUS, THE EXCESS AMOUNT RECEIVED ON ALLOTMENT OF SHARES AS SHARE PREMIUM FOR RS.14,88,48,6801- (AS TABULATED ABOVE) SHOULD BE TREATED AS INCOME OF THE ASSESSEE U/S 56(2)(VIIB) OF THE I. T. ACT. IN THE LIGHT OF ENTIRE FACTS DISCUSSED ABOVE, I AM OF THE CONSIDERED VIEW THAT THE ASSESSMENT ORDER PASSED U/S 143(3)192CA(3) ON 27.12.2017 FOR THE A.Y. 2014-15 IN YOUR CASE IS ERRONEOUS AS WELL AS PREJUDICIAL TO THE INTEREST OF REVENUE, WHICH REQUIRES TO BE REVISED U/S 263. HOWEVER, BEFORE I PROCEED TO INVOKE THE POWERS U/S 263 AND PASS AN APPROPRIATE ORDER, I DEEM IT PROPER TO GIVE YOU AN OPPORTUNITY OF BEING HEARD IN THE MATTER. 5. IN COMPLIANCE TO THE ABOVE NOTICE DETAILED SUBMI SSIONS WERE FILED BY THE AUTHORISED REPRESENTATIVE OF THE ASSES SEE AND AFTER PERUSING THE SAME LD. PCIT SET ASIDE THE ASSESSMENT ORDER U/S 143(3) R.W.S. 92CA(3) OF THE ACT HOLDING IT TO BE E RRONEOUS AND PREJUDICIAL TO THE INTEREST OF REVENUE SUMMARILY OB SERVING AS FOLLOWS:- M/S RUCHI J OIL PVT. LTD ITA NO.176/IND/2020 7 3.1 THE CASE RECORDS OF THE ASSESSEE WERE GONE THROUGH AND IT WAS OBSERVED THAT THE ASSESSEE CLAIMED SHARE PREMIUM AT A VERY H IGH RATE IN COMPARISON TO THE RATE VALUED BY THE FIRM OF CHARTE RED ACCOUNTANTS, IN THE CASE OF J OIL MILLS AND TOYOTA TSUSHO ON THE APPARE NT GROUND THAT THESE WERE NOT RESIDENTS OF INDIA. THE FACTS OF THE CASE, PERFORMANCE OF THE BUSINESS RESULTS OF THE ASSESSEE AND ITS OVERALL WO RTH INCLUDING TRACK RECORDS OF THE PROMOTER GROUP I.E. RUCHI SOYA, AS M AY BE OBSERVED FROM THE BALANCE SHEET, DID NOT JUSTIFY IN ANY MANNER, THE RATE OF SHARE PREMIUM CHARGED BY THE ASSESSEE. DURING THE COURSE OF ASSES SMENT PROCEEDINGS THE AO DID NOT EXAMINE THIS ASPECT OF THE CASE AND COMP LETED THE ASSESSMENT PROCEEDINGS. THUS, THE ACTION OF THE AO IS ERRONEOUS AND PREJUDICIAL TO THE INTEREST OF REVENUE. 4. IN VIEW OF THE GIVEN FACTS AND CIRCUMSTANCES, T HE ASSESSMENT ORDER OF THE AO IS ERRONEOUS AND PREJUDICIAL TO THE INTEREST OF RE VENUE. THE ORDER OF THE AO IS, THEREFORE, SET ASIDE TO THE FILE OF THE AO WITH DIRECTION TO EXAMINE THE ISSUE OF SHARE PREMIUM AND PASS FRESH ASSESSMENT ORDER, AFTE R AFFORDING PROPER OPPORTUNITY TO THE ASSESSEE. THE ORDER DATED 29.11 .2017 PASSED U/S 143(3)/92CA(3) IS, ACCORDINGLY, SET ASIDE. 6. AGGRIEVED ASSESSEE IS NOW IN APPEAL BEFORE THE T RIBUNAL. 7. LD. COUNSEL FOR THE ASSESSEE VEHEMENTLY ARGUED R EFERRING TO THE FOLLOWING WRITTEN SUBMISSIONS INCLUDING THE JUD GMENTS REFERRED AND RELIED THEREIN:- THE COMPANY ENGAGED IN MANUFACTURING AND PROCESSIN G OF SOYA OIL HAD ENTERED INTO A BUSINESS AGREEMENT WITH M/S. RUCHI S OYA INDUSTRIES LTD M/S RUCHI J OIL PVT. LTD ITA NO.176/IND/2020 8 TO ACQUIRE AN UNDERTAKING LOCATED AT SHUJALPUR ON S LUMP SALE BASIS. A JOINT VENTURE WAS FORMED WITH TWO NON-RESIDENT COMP ANIES WHO SUBSCRIBED TO SHARE CAPITAL OF THE COMPANY AT A PRE MIUM. M/S. RUCHI SOYA INDUSTRIES LIMITED HAD SUBSCRIBED 204000 SHARE S @ 2051.35 PER SHARE BASED ON SHARE VALUATION REPORT FROM M/S. SSP A & CO., CHARTERED ACCOUNTANTS BY ADOPTING DISCOUNTED CASH FLOW (DCF) METHODS PERMITTED BY RULE 11UA(2)(B) OF INCOME TAX RULES, W HEREAS TWO NON- RESIDENT COMPANIES HAD SUBSCRIBED THE SHARES AT A P REMIUM AS UNDER :- NAME OF THE COMPANY NO OF EQUITY SHARES. PREMIUM PER SHARE M/S. TOYOTA TSUSHO CORP. JAPAN 92,000 SHARES RS.2830.68 M/S. J. OIL MILLS INC. JAPAN 1,04,000 SHARES RS.2830.68 TOTAL 1,96,000 SHARES FOREIGN DIRECT INVESTMENT (FDI) WAS MADE BY AFORESA ID TWO FOREIGN COMPANIES AND NECESSARY INTIMATION WAS SUBMITTED TO HDFC BANK LTD BY THE APPELLANT FOR ITS ONWARD SUBMISSION TO REGIO NAL OFFICE OF RBI AT ITS END IN COMPLIANCE TO NOTIFICATION NO. FEMB 20/2000- RB DATED 03.05.2000. ADEQUATE ENQUIRIES IN RELATION TO SHARES ISSUED AT A PREMIUM WERE MADE BY THE ASSTT. COMMISSIONER OF INCOME TAX WHO PASSED DETAILED ORDER U/S 143(3) OF THE ACT. THE PR. COMMISSIONER OF INCOME T AX. LATER ON, INVOKED PROVISIONS OF SECTION 263 OF THE ACT ON THE GROUND THAT EXCESS AMOUNT RECEIVED ON ALLOTMENT OF SHARES AS SHARE PREMIUM FR OM AFORESAID NON- RESIDENT COMPANIES SHOULD HAVE BEEN TREATED AS INCOME U/S S 56(2)(VIIB ) M/S RUCHI J OIL PVT. LTD ITA NO.176/IND/2020 9 OF THE ACT. THE ASSESSMENT ORDER PASSED U/S 143(3)/ 92CA(3) WAS CONSIDERED AS ERRONEOUS AS WELL AS PREJUDICIAL TO T HE INTEREST OF REVENUE. SUBMISSIONS : AT THE OUTSET, WE SUBMIT THAT QUESTIONS INVOLVED FO R ADJUDICATION REGARDING VALIDITY OF ORDER PASSED U/S 263 OF THE A CT BY THE PRINCIPAL COMMISSIONER OF INCOME TAX ARE :- I) WHETHER PROVISIONS OF SECTION 56(2)(VIIB) OF THE AC T WERE APPLICABLE IN RELATION TO ISSUE OF SHARES AT A PREMIUM BY THE APPELLANT TO NON- RESIDENT COMPANIES?. II) WHETHER ENQUIRIES IN DEPTH WERE MADE BY THE AO WITH REGARD TO ISSUE OF SHARES AT A LARGE PREMIUM OR THERE WAS LAC K OF ENQUIRY ?. III) BECAUSE THE AO DID NOT DISCUSS THE REASONS FOR NON- APPLICABILITY OF SECTION 56(2)(VIIB) IN THE ASSESSMENT ORDER, CAN IT BE CONSIDERED AS ERRONEOUS AND PREJUDICIAL TO THE INTEREST OF REV ENUE ?. IV) WHETHER TWIN CONDITIONS REQUIRED U/S 263 OF THE ACT WERE SATISFIED TO JUSTIFY THE ORDER PASSED BY THE PR. COMMISSIONER OF INCOME TAX ?. OUR SUBMISSIONS FOR KIND CONSIDERATION ARE AS UNDE R :- APPLICABILITY OF SECTION 56(2)(VIIB) OF THE ACT : WE SUBMIT THAT PROVISIONS OF SECTION 56(2)(VIIB) OF THE ACT ARE APPLICABLE ONLY WHERE ANY CONSIDERATION FOR ISSUE OF SHARES IS RECEIVED BY THE COMPANY FROM ANY PERSON BEING A RESIDENT, WHICH PRO VISION IS REPRODUCED HEREUNDER FOR READY REFERENCE :- WHERE A COMPANY, NOT BEING A COMPANY IN WHICH THE PUBLIC ARE SUBSTANTIALLY INTERESTED, RECEIVES, IN ANY PREVIOUS YEAR, FROM ANY PERSON BEING A RESIDENT , ANY CONSIDERATION FOR ISSUE OF SHARES THAT EXCEED S THE FACE VALUE OF SUCH SHARES, THE AGGREGATE CONSIDERAT ION RECEIVED FOR SUCH SHARES AS EXCEEDS THE FAIR MARKET VALUE OF THE SHAR ES. M/S RUCHI J OIL PVT. LTD ITA NO.176/IND/2020 10 IT IS HUMBLY SUBMITTED THAT IT IS AN UNDISPUTED FAC T THAT BOTH THE COMPANIES TO WHOM EQUITY SHARES WERE ISSUED AT A PR EMIUM WERE NON- RESIDENT COMPANIES AS EVIDENT FROM (A) REMITTANCES RECEIVED FROM FOREIGN COMPANIES THROUGH THEIR BANKS AND (B) INVESTMENT TH ROUGH FDI ROUTE DULY INTIMATED TO RBI. THE ASSESSING AUTHORITY HAD TAKEN INTO COGNIGENCE THESE FACTS AND REFERRED THE MATTER TO DCIT (TPO) A LSO. HAVING SATISFIED THAT SHARES WERE ISSUED TO BOTH NON-RESIDENT COMPAN IES OF JAPAN, ADDITIONAL PREMIUM RECEIVED BY THE COMPANY WAS NOT ASSESSED TO TAX BECAUSE PROVISIONS OF SECTION 56(2)(VIIB) OF THE AC T, ARE NOT APPLICABLE. FROM PLAIN WORDINGS OF THE SECTION 56(2)(VIIB) IT I S EVIDENT THAT DEEMING FICTION OF LAW CAN BE INVOKED IN RELATION TO THE AM OUNT RECEIVED BY THE APPELLANT COMPANY FROM A PERSON BEING A RESIDENT AG AINST ISSUE OF SHARES AT A PREMIUM. THE APPELLANT ISSUED THE SHARES AT A PREMIUM TO NON -RESIDENT COMPANIES HENCE ADDITIONAL PREMIUM RECEIVED WAS NOT COVERED W ITHIN THE SCOPE OF SECTION 56(2)(VIIB) OF THE ACT. THE WORDS RESIDEN T IN THE STATUTE CANNOT BE READ TO INCLUDE NON-RESIDENT ALSO. KIND ATTENTION IS INVITED TO FOLLOWING JUDGMENTS W HEREIN PRINCIPLES OF INTERPRETATION OF THE TAXING STATUTE HAVE BEEN ENU MERATED :- A) MAHIM PATRAM PVT LTD VS. UNION OF INDIA (2007) 10 S TJ 637 (SC) [FOLLOWED IN RATLAM PACKERS PVT LTD VS. STATE OF MP (2014 ) 24 STJ 24 (MP) HELD A TAXING STATUTE IS TO BE STRICTLY CONSTRUED. THE SUBJECT IS NOT TO BE TAXED WITHOUT CLEAR WORDS OF THE LAW. IF THE PERSON SOUGHT TO BE TAXED COMES WITHIN THE LETTER OF THE LAW, HE MUS T BE TAXED, HOWEVER GREAT HARDSHIP MAY APPEAR TO BE. ON THE OTHER HAND, IF THE LEGISLATURE CANNOT BRING THE SUBJECT WITHIN THE LETTER OF THE L AW, THE SUBJECT IS NOT M/S RUCHI J OIL PVT. LTD ITA NO.176/IND/2020 11 LIABLE TO TAX, HOWSOEVER APPARENTLY WITHIN THE SPIR IT OF LAW THE CASE MIGHT OTHERWISE APPEAR TO BE. AN EQUITABLE CONSTRUC TION IS NOT ADMISSIBLE IN A TAXING STATUTE. IN A TAXING ACT ONE HAS TO LOOK MERELY AT WHAT IS CLEARLY SAID. THERE IS NO ROOM FOR ANY I NTENDMENT. THERE IS NO EQUITY ABOUT A TAX. THERE IS NO PRESUMPTION AS T O TAX. NOTHING IS TO BE READ IN, NOTHING IS TO BE IMPLIED. ONE CAN ONLY LOOK FAIR AT THE LANGUAGE USED. B) VODAFONE INTERNATIONAL HOLDINGS B.V. VS. UNION OF I NDIA (2012) 341 ITR 1 (SC) HELD THE COURT HAS TO GIVE EFFECT TO THE LANGUAGE OF THE SECTION WHEN IT IS UNAMBIGUOUS AND ADMITS OF NO DOUBT REGARDING ITS INTERPRETATION, PARTICULARLY WHEN A LEGAL FICTION I S EMBEDDED IN THAT SECTION. A LEGAL FICTION HAS A LIMITED SCOPE AND CA NNOT BE EXPANDED BY GIVING PURPOSIVE INTERPRETATION PARTICULARLY IF THE RESULT OF SUCH INTERPRETATION IS TO TRANSFORM THE CONCEPT OF CHARG EABILITY. II. ENQUIRIES IN DEPTH BY THE A.O. KIND ATTENTION IS INVITED TO ASSESSMENT ORDER WHICH EVIDENTLY PROVES THAT ADEQUATE ENQUIRIES WERE MADE BY THE ASSTT. COMMISSI ONER OF INCOME TAX 2-(1), UJJAIN REGARDING SHARES ISSUED AT A PREMIUM AS UNDER :- I)VIDE FIRST NOTICE U/S 142(1) OF THE ACT DATED 30. 05.2016 SPECIFIC QUERRY WAS RAISED REGARDING ISSUE OF SHARES AT A PREMIUM A ND APPLICABILITY OF PROVISIONS OF SECTION 56(2)(VIIB) OF THE ACT[WRONGL Y TYPED AT 36(VIIB)] AS UNDER :- 4. AS PER BALANCE SHEET YOU HAVE DECLARED ISSUED S HARE CAPITAL AT RS.40,00,000/- AND SHARE PREMIUM RECEIPT AT RS.95,2 7,75,180/-. THERE IS NO SUFFICIENT RESERVE IN BALANCE SHEET TO WORK OUT VALUE OF SHARE ISSUED TO THE SHARE HOLDERS. PLEASE GIVE COMPLETE DETAILS OF THE SHARE PREMIUM AND APPLICABILITY OF SECTION 36(VIIB) OF THE INCOME TAX ACT. M/S RUCHI J OIL PVT. LTD ITA NO.176/IND/2020 12 II) IN RESPONSE VIDE LETTER DATED 15.06.2016 (PAGE 8 OF P.B)THE COMPANY HAD SUBMITTED FOLLOWING DETAILS RELATING TO ISSUE O F SHARES AT A PREMIUM TO M/S. RUCHI SOYA INDUSTRIES LIMITED AND TWO FOREI GN COMPANIES :- A) LIST OF SHAREHOLDERS AND DIRECTORS OF THE COMPANY ( PAGE 11 & 12 OF P.B). B) CERTIFICATES IN SUPPORT OF FOREIGN INWARD REMITTANC E ISSUED BY M/S. MIZUHO BANK LIMITED AND THE BANK OF TOKYO MITSUBI SHI UFJ LTD (PAGE 13 OF P.B). C) LETTER ADDRESSED TO HDFC BANK LIMITED RELATED TO FD I. (PAGE 25 OF P.B) D) BOARDS RESOLUTION & CERTIFICATE ISSUED BY COMPANY S ECRETARY CONFIRMING STATUTORY COMPLIANCES RELATED TO ISSUE O F SHARES TO FDI. (PAGE 26 TO 28 OF P.B). III) FRESH NOTICE U/S 142(1) OF THE ACT DATED 24.08 .2016 WAS ISSUED DIRECTING TO EXPLAIN THE REASONS OF LARGE PREMIUM O N SHARES VIDE PARA 19 &22 OF THE QUESTIONNAIRE (PAGE 31 OF P.B.) AS UNDER :- 19 PLEASE EXPLAIN THE REASONS FOR LARGE SHARE PR EMIUM RECEIVED DURING THE YEAR 22 SCRUTINY REASONS : 1. LOW NET PROFIT OR LOSS SHOWN FROM LARGE GROSS R ECEIPT, 2. LARGE SHARE PREMIUM RECEIVED DURING THE YEAR, 34..5.6 .. IV) IN RESPONSE TO NOTICE, REPLIES WERE SUBMI TTED AS UNDER :- A) ON 12.09.2016STATING THAT SECTION 56(2)(VIIB) OF TH E ACT IS NOT APPLICABLE TO THE COMPANYIN RELATION TO SHARES ISSU ED AT A PREMIUM OF RS.2051.35 (1,94,000 SHARES) AND ON A PREMIUM OF RS .2830.68 (1,96,000 SHARES). (PAGE 53 TO 55 OF P.B II) B) VIDE LETTER DATED 22.09.2016,LARGE SHARE PREMIUM W AS EXPLAINED BY GIVING A REFERENCE TO VALUATION REPORT AND BUSIN ESS PURCHASE M/S RUCHI J OIL PVT. LTD ITA NO.176/IND/2020 13 AGREEMENT. IT WAS SPECIFICALLY STATED THAT THE ISSU E OF SHARES AT A PREMIUM WAS WELL WITHIN THE PROVISIONS OF SECTION 5 6(2)(VIIB) OF THE ACT.(PAGE 56 TO 59 OF P.B II) C) VIDE LETTER DATED 07.11.2016 REPORT OF SSPA & CO. WAS REFERRED WITH REFERENCE TO PROVISIONS OF SECTION 56(2)(VIIB) (PAGE 60& 61 OF P.B II)AND D) VIDE LETTER DATED 15.12.2016, EQUITY SHARES ISSUED TO TWO NON- RESIDENT COMPANIES AT ARMS LENGTH PRICE WAS SUPPORT ED BY AUDIT REPORT U/S 92(E) OF THE ACT.(PAGE 62 TO 64 OF P.B II) V)CONSIDERING THE FACT THAT SHARES WERE ISSUED TO N ON-RESIDENT COMPANIES,BY GIVING REFERENCE TO AUDIT REPORT FURNI SHED U/S 92B OF THE ACT (FORM 3CEB),APPROVAL WAS OBTAINED BY THE ACITFR OM PR. CIT, UJJAIN, TO REFER THE CASE TO DY. COMMISSIONER OF INCOME TAX (TPO). DCIT (TPO) VERIFIED THE ISSUANCE OF EQUITY SHARES TO BOTH NON- RESIDENT COMPANIES AT A PREMIUM AT ARMS LENGTH PRICE AND PASSED THE ORDER ON 11.09.2017(PAGE 33 TO 35 OF P.B). VI) VIDE PARA-6.2.3. OF THE ASSESSMENT ORDER, THE SAID TRANSACTION OF ISSUANCE OF SHARES AT A PREMIUM WAS DISCLOSED AND B ENCHMARKED. (PAGE 42&43 OF P.B). VII)THE TRANSACTION RELATING TO ISSUE OF SHARES TO AFORESAID TWO NON- RESIDENT COMPANIES WAS DISCUSSED IN PARA 6.3.11 OF THE ASSESSMENT ORDER PASSED U/S 143(3) OF THE ACT, WITH REFERENCE TO INTERNATIONAL TRANSACTION WITHIN THE MEANING OF SECTION 92B OF TH E ACT [PAGE 46 OF P.B] VIII) THE CONCLUSIONS DRAWN BY DY. CIT (TPO) WERE ALSO CONSIDERED BY THE AO VIDE PARA 6.5.2 OF THE ASSESSMENT ORDER AS U NDER :- THE LD. TPO, HAS CONSIDERED THE ISSUANCE OF EQUITY SHARES TO BOTH THE ABOVE MENTIONED ENTITIES AS AN INTERNATIONAL TRANSA CTION BUT HAS NOT MADE ANY ADDITION TO THE VALUE OF THE SAME . THEREFORE, THE ORDER OF THE LD. TPO M/S RUCHI J OIL PVT. LTD ITA NO.176/IND/2020 14 U/S 92CA(3) AS REGARDS VALUATION OF THE ABOVE TRANS ACTION AND THE CATEGORIZATION OF THE SAME AS AN INTERNATIONAL TRAN SACTION IS ACCEPTABLE.[PAGE 47 OF P.B] THUS, ASSTT. COMMISSIONER OF INCOME TAX MADE DETAIL ED ENQUIRY WITH REFERENCE TO SUCH INVESTMENT AND NEVER DOUBTED UPON THE GENUINENESS OF SUCH FOREIGN INVESTMENT.AFTER DUE VERIFICATION OF A LL DOCUMENTS PLACED ON RECORD & HAVING DETAILED ENQUIRIES REGARDING ISSUE OF SHARE AT A PREMIUM, TO BOTH COMPANIES, THE AO HAD EXAMINED THE FACT THAT SHARES WERE ISSUED AT A PREMIUM HIGHER THAN THE VALUE DETE RMINED AS PER RULE 11UA(2)(B) OF INCOME TAX RULES. THERE WAS NEITHER LACK OF ENQUIRY NOR INADEQUATE ENQUIRY BY THE ACIT,HENCE THE ASSESSME NT ORDER PASSED U/S 143(3) OF THE ACT CANNOT BE TREATED AS ERRONEOU S AND PREJUDICIAL TO THE INTEREST OF REVENUE. RELIANCE IS PLACED UPON FOLLOWING JUDGMENTS:- I) CIT VS. MEHROTRA BROTHERS [2004] 270 ITR 157 ( MP) HELD WHETHER IF WHILE MAKING ASSESSMENT, ASSESSING OFFICER HAS MADE AN INADEQUATE ENQUIRY , THAT WOULD NOT, BY ITSELF, GIVE OCCASION TO COMMISSIONER TO PASS ORDER UNDER SECTION 263 , MERELY BECAUSE HE HAS DIFFERENT OPINION IN MATTER.IT IS ONLY IN CASES OF 'LACK OF INQUIRY' THAT SUCH A COURSE OF ACTION WOULD BE OPEN. WHETHER FURTHER, ON FACTS AND LAW, VIEW TAKEN BY AS SESSING OFFICER WAS ONE OF POSSIBLE VIEWS AND, THEREFORE, ASSESSMENT OR DER PASSED BY ASSESSING OFFICER COULD NOT BE HELD TO BE PREJUDICI AL TO INTEREST OF REVENUE - HELD, YES II) CIT VS. RATLAM COAL ASH CO. - [1987] 171 ITR 14 1 (MP) HELD-IN THE INSTANT CASE, THE TRIBUNAL HAD FOUND T HAT THE ASSESSEE HAD FURNISHED ALL THE REQUISITE INFORMATION AND THAT TH E ITO CONSIDERING ALL THE FACTS HAD COMPLETED THE ASSESSMENT. IT WAS FURT HER HELD THAT IN THE M/S RUCHI J OIL PVT. LTD ITA NO.176/IND/2020 15 CIRCUMSTANCES OF THE CASE,IT COULD NOT BE HELD THAT THE ITO HAD MADE ASSESSMENT WITHOUT MAKING PROPER ENQUIRIES. IN VIEW OF THESE FINDINGS, THE TRIBUNAL WAS JUSTIFIED IN REVERSING THE ORDER P ASSED BY THE COMMISSIONER.' III)NAROTTAM MISHRA VS. CIT [2015] 25 ITJ 506 (ITAT , INDORE BENCH) HELD EVEN THIS IS NOT THE CASE OF THE LD. CIT THAT CERTAIN EVIDENCES WERE OVERLOOKED WHICH WERE VERY MUCH ON RECORD OR IN THE KNOWLEDGE OF THE AO. EVEN THIS IS NOT THE CASE OF LD. CIT THAT CERTA IN NEW FACTS OR EVIDENCES WERE BROUGHT TO THE NOTICE OF THE REVENUE DEPARTMENT WHICH WERE HAVING A DIRECT IMPACT ON THE INCOME ASSESSED BY THE AO. NEITHER THERE WAS AN ESCAPEMENT OF EVIDENCE NOR THERE WAS A NY EVIDENCE NOW BROUGHT TO THE NOTICE OF THE REVENUE DEPARTMENT, TH EREFORE IF THAT WAS NOT THE POSITION, THEN WE ARE NOT INCLINED TO GIVE OUR APPROVAL TO SUCH DIRECTIONS. IV) FLEXITUFF INTERNATIONAL LTD VS. PR. CIT (2019) 3 ITJ ONLINE 654 (INDORE BENCH) (ITA NO. 282/IND/2017 ORDER PRONOUNCED ON 14.05.2 019 PARA 18) HELD IT REMAINS AN UNDISPUTED FACT THAT THE ASSESS ING OFFICER HAD MADE ADEQUATE ENQUIRES AS NOTED HEREIN ABOVE ADOPTING ON E OF PERMISSIBLE VIEW FOR ALLOWING THE ASSESSEES CLAIM FOR EXEMPTIO N U/S 10A OF THE ACT BEFORE THE CLAIM OF SET OFF OF BROUGHT FORWARD AND CURRENT YEAR LOSS. THE LD. PR. CIT TOOK A DIFFERENT VIEW OF THE MATTER. HO WEVER THAT WOULD NOT BE SUFFICIENT TO PERMIT LD. PR. CIT TO EXERCISE THE PO WER U/S 263 OF THE ACT BECAUSE WHEN TWO VIEWS ARE POSSIBLE AND LD. PR.CIT DOES NOT AGREE WITH THE VIEW TAKEN BY THE ASSESSING OFFICER, ASSESSMENT ORDER CANNOT BE TREATED AS ERRONEOUS AND PREJUDICIAL TO THE INTERES T OF THE REVENUE UNLESS THE VIEW TAKEN BY THE ASSESSING OFFICER NOT UNACCEP TABLE IN LAWAS THE LD. AO; AFTER MAKING DETAILED EN QUIRY ALLOWED M/S RUCHI J OIL PVT. LTD ITA NO.176/IND/2020 16 ASSESSEES CLAIM OF EXEMPTION U/S 10A OF THE ACT AT RS.12,51,79,200/-, THIS ACTION OF THE LD. A.O CANNOT BE HELD AS ERRONE OUS AND PREJUDICIAL TO THE INTEREST OF REVENUE. WE SUBMIT THAT THERE WAS MUST BE SOME PRIMA FACIE M ATERIAL ON RECORD TO SHOW THAT THE ORDER IS UNSUSTAINABLE IN LAW AND THE TAX WHICH WAS LEGALLY PAYABLE HAS NOT BEEN IMPOSED. THE PRESENT C ASE IS NEITHER A CASE OF NO ENQUIRY NOR A CASE WHERE THE AO, FAILED TO MAKE NECESSARY ENQUIRY. IN FACT, THE ASSESSMENT ORDER WAS PASSED AFTER MAKING DETAILED ENQUIRY AND APPLICATION OF MIND. III. REFERENCE IN THE ASSESSMENT ORDER REGARDING NON- APPLICABILITY OF SEC. 56(2)(VIIB): IT IS SUBMITTED THAT HAVING SATISFIED AFTER ENQUIRY AND APPLICATION OF MIND THAT SECTION 56(2)(VIIB) WAS NOT APPLICABLE IN RELA TION TO SHARES ISSUED TO NON-RESIDENTS,IF THE REASONS FOR NON-APPLICABILITY OF SAID SECTION WERE NOT SPECIFICALLY REFERRED TO IN THE ASSESSMENT ORDE R, THE SAME CANNOT BE TERMED AS TO BE ERRONEOUS ORDER . RELIANCE IS PLACED ON FOLLOWING JUDGMENTS :- A) CIT VS. GABRIEL INDIA LTD (1993) 203 ITR 108 (BOM). HELD THAT IT IS CLEAR THAT AN ORDER CANNOT BE TERM ED AS ERRONEOUS UNLESS IT IS NOT IN ACCORDANCE WITH LAW. IF AN INCOME TAX OFFICER ACTING IN ACCORDANCE WITH LAW MAKES A CERTAIN ASSESSMENT, THE SAME CANNOT BE BRANDED AS ERRONEOUS BY THE COMMISSIONER SIMPLY BEC AUSE, ACCORDING TO HIM, THE ORDER SHOULD HAVE BEEN WRITTEN MORE ELABOR ATELY. THIS SECTION DOES NOT VISUALIZE A CASE OF SUBSTITUTION OF THE JU DGMENT OF THE COMMISSIONER FOR THAT OF THE INCOME TAX OFFICER, WH O PASSED THE ORDER, UNLESS THE DECISION IS HELD TO BE ERRONEOUS . ( AT PAGE 114/115(A ). M/S RUCHI J OIL PVT. LTD ITA NO.176/IND/2020 17 WE HAVE ALREADY HELD WHAT IS ERRONEOUS. IT MUST BE AN ORDER WHICH IS NOT IN ACCORDANCE WITH THE LAW OR WHICH HAS BEEN PASSED BY THE INCOME TAX OFFICER WITHOUT MAKING ANY ENQUIRY IN UNDUE HASTE (AT PAGE 116(B). FURTHER ENQUIRY AND/OR FRESH DETERMINATION CAN BE DIRECTED BY THE COMMISSIONER ONLY AFTER COMING TO THE CONCLUSION TH AT THE EARLIER FINDING OF THE INCOME TAX OFFICER WAS ERRONEOUS AND PREJUDI CIAL TO THE INTERESTS OF THE REVENUE [AT PAGE 117(D)] B) CIT VS. RELIANCE COMMUNICATIONS LTD (2017) 396 ITR 217 (BOM.) HELD TRIBUNAL NOTED THAT ASSESSING OFFICER HAD MAD E DETAILED ENQUIRIES ABOUT AFORESAID ASPECT AND MERE FACT THAT HE DID NO T MAKE ANY REFERENCE TO SAID ISSUE IN ASSESSMENT ORDER, COULD NOT MAKE S AID ORDER ERRONEOUS AND PREJUDICIAL TO INTEREST OF REVENUES - ACCORDING LY, TRIBUNAL SET ASIDE REVISIONAL ORDER - WHETHER FINDING RECORDED BY TRIB UNAL BEING A FINDING OF FACT, NO SUBSTANTIAL QUESTION OF LAW AROSE THERE FR OM - HELD, YES [PARA 11] C)CIT VS.ANIL KUMAR SHARMA - [2011] 335 ITR 83(DELH I) HELD 'THOUGH THE ASSESSMENT ORDER DOES NOT PATENTLY INDICATE THAT THE ISSUE IN QUESTION HAD BEEN CONSIDERED BY THE ASSESS ING OFFICER, THE RECORD SHOWED THAT THE ASSESSING OFFICER HAD APPLIE D HIS MIND. ONCE SUCH APPLICATION OF MIND IS DISCERNIBLE FROM THE RE CORD, THE PROCEEDINGS UNDER SECTION 263 WOULD FELL INTO THE AREA OF THE C OMMISSIONER HAVING A DIFFERENT OPINION. WE ARE OF THE VIEW THAT THE FIND INGS OF FACTS ARRIVED AT BY THE TRIBUNAL DO NOT WARRANT INTERFERENCE OF THIS COURT. THAT BEING THE POSITION, THE PRESENT CASE WOULD NOT BE ONE OF 'LAC K OF INQUIRY' AND, EVEN IF THE INQUIRY WAS TERMED AS INADEQUATE, 'THAT WOUL D NOT BY ITSELF GIVE M/S RUCHI J OIL PVT. LTD ITA NO.176/IND/2020 18 OCCASION TO THE COMMISSIONER TO PASS ORDERS UNDER SECTION 263 OF THE SAID ACT, MERELY BECAUSE HE HAS A DIFFERENT OPINION IN THE MATTER'. D) CIT VS. M/S. VIKAS POLYMERS (2012) 341 ITR 537 ( DEL) AT PAGE 548. HELD THIS IS FOR THE REASON THAT IF A QUERY WAS RA ISED DURING THE COURSE OF SCRUTINY BY THE ASSESSING OFFICER, WHICH WAS ANS WERED TO THE SATISFACTION OF THE ASSESSING OFFICER, BUT NEITHER THE QUERY NOR THE ANSWER WAS REFLECTED IN THE ASSESSMENT ORDER, THAT WOULD N OT, BY ITSELF, LEAD TO THE CONCLUSION THAT THE ORDER OF THE ASSESSING OFFI CER CALLED FOR INTERFERENCE AND REVISION. E) CIT VS. FINE JEWELLERY (INDIA) LTD (2015) 372 IT R 303 (BOM). [IDEA CELLULAR LTD VS. DY. CIT (2008) 301 ITR 407 ( BOM) FOLLOWED] HELD IF A QUERY IS RAISED DURING ASSESSMENT PROCEE DINGS AND RESPONDED TO BY THE ASSESSEE, THE MERE FACT THAT IT IS NOT DE ALT WITH IN THE ASSESSMENT ORDER WOULD NOT LEAD TO A CONCLUSION THA T NO MIND HAD BEEN APPLIED TO IT. F) CIT VS. KRISHNA CAPBOX (P) LTD - [2015] 372 ITR 310 (ALL) TRIBUNAL HELD THAT ONCE INQUIRY WAS MADE, A MERE N ON-DISCUSSION OR NON-MENTION THEREOF IN ASSESSMENT ORDER COULD NOT L EAD TO ASSUMPTION THAT ASSESSING OFFICER DID NOT APPLY HIS MIND OR TH AT HE HAD NOT MADE INQUIRY ON SUBJECT AND THIS WOULD NOT JUSTIFY INTER FERENCE BY COMMISSIONER BY ISSUING NOTICE UNDER SECTION 263 . IN SUBSTANCE, AFTER PROPER APPLICATION OF MIND, BY CONSIDERING THE ORDER PASSED BY TPO U/S 92CA(3) OF THE ACT AND THE FACT T HAT SHARES WERE ISSUED AT A PREMIUM TO TWO NON-RESIDENT FOREIGN COM PANIES,THE AO DID NOT MAKE ANY ADDITION U/S 56(2)(VIIB) OF THE ACT. O N SUCH FACTS, AND CIRCUMSTANCES, IT CANNOT BE CONSTRUED THAT ANY ERRO R WAS COMMITTED BY M/S RUCHI J OIL PVT. LTD ITA NO.176/IND/2020 19 AO. IT IS NOT A CASE OF NON-APPLICATION OF MIND BY THE ASSESSING AUTHORITY HENCE THE ORDER PASSED U/S 143(3) OF THE ACT WAS NEITHER ERRONEOUS NOR PREJUDICIAL TO THE INTEREST OF REVENU E. IV. ERRONEOUS AND PREJUDICIAL TO THE INTEREST OF REVENUE : WE SUBMIT THAT IT IS A WELL SETTLED LAW THAT TO INV OKE THE PROVISIONS OF SECTION 263 BOTH THE CONDITIONS VIZ. THE ORDER MUST BE ERRONE OUS AND PREJUDICIAL TO THE INTEREST OF REVENUE MUST BE SAT ISFIED. RELIANCE IS PLACED ON THE FOLLOWING JUDICIAL PRECEDENTS :- I) MALABAR INDUSTRIAL CO. LTD. VS. CIT - [2000 ] 243 ITR 83(SC) HELD THE COMMISSIONER HAS TO BE SATISFIED OF TWIN CONDITIONS, NAMELY, (I) THE ORDER OF THE ASSESSING OFFICER SOUGHT TO BE REVISED IS ERRONEOUS; AND (II) IT IS PREJUDICIAL TO THE INTERESTS OF THE REVENUE. IF ONE OF THEM IS ABSENT-IF THE ORDER OF THE INCOME TAX OFFICER IS ER RONEOUS BUT IS NOT PREJUDICIAL TO THE REVENUE, RECOURSE CANNOT BE HAD TO SECTION 263(1) OF THE ACT. II) H.H. MAHARAJA RAJA PAWER DEWAS - [1982] 138 ITR 518 (MP) HELD UNDER SECTION 263(1) TWO PRE-REQUISITES MUST BE PRESENT BEFORE THE COMMISSIONER CAN EXERCISE THE REVISIONAL JURISDICTI ON CONFERRED ON HIM. FIRST IS THAT THE ORDER PASSED BY THE ITO MUST BE E RRONEOUS. SECOND IS THAT THE ERROR MUST BE SUCH THAT IT IS PREJUDICIAL TO THE INTERESTS OF THE REVENUE. IF THE ORDER IS ERRONEOUS BUT IT IS NOT PR EJUDICIAL TO THE INTERESTS OF THE REVENUE, THE COMMISSIONER CAN NOT EXERCISE T HE REVISIONAL JURISDICTION UNDER SECTION 263(1) .................... UNLESS THE PREJUDICE TO THE INTERESTS OF THE REVENUE IS SHOWN, THE JURISDICTION UNDER SECTION 263(1) CANNOT BE EXERCISED BY THE COMMISSIONER, EVEN THOU GH THE ORDER IS ERRONEOUS. M/S RUCHI J OIL PVT. LTD ITA NO.176/IND/2020 20 III) V. G. KRISHNAMURTHY VS. CIT - [1985] 152 ITR 683 (KAR) HEAD NOTE SECTION 263 OF INCOME TAX ACT, CAN BE I NVOKED ONLY WHEN THE CIT PRIMA-FACIE FINDS THAT THE ORDER MADE BY TH E ITO WAS ERRONEOUS AND WAS PREJUDICIAL TO THE INTEREST OF REVENUE. BOT H THESE FACTORS MUST EXIST SIMULTANEOUSLY. IF ONE OR THE OTHER OF THE F ACTORSIS ABSENT, THE COMMISSIONER CANNOT EXERCISE THE SUO MOTO POWER OF REVISION UNDER SECTION 263 .' LAST BUT NOT THE LEAST, WE SUBMIT THAT THE LD. PR. COMMISSIONER OF INCOME TAX DID NOT PROPERLY CONSIDER THE VITAL FACT AND IGNORED THE SUBMISSIONS MADE BEFORE HIM VIDE LETTER DATED 06.03 .2020 (PAGE 49 TO 52 OF P.B)IN RESPONSE TO HIS NOTICE WHEREIN IT WAS STA TED THAT ISSUE OF SHARES AT A PREMIUM TO NON-RESIDENT DOES NOT ATTRACT PROVI SIONS OF SECTION 56(2)(VIIB) OF THE ACT.VIDE PARA 3.1 OF THE ORDER P ASSED U/S 263 OF THE ACT, THE PR. COMMISSIONER OF INCOME TAX, CONCLUDED AS U NDER :- THE FACTS OF THE CASE, PERFORMANCE OF THE BUSINESS RESULTS OF THE ASSESSEE AND ITS OVERALL WORTH INCLUDING TRACK RECORDS OF TH E PROMOTER GROUP I.E. M/S. RUCHI SOYA, AS MAY BE OBSERVED FROM THE BALANC E SHEET, DID NOT JUSTIFY IN ANY MANNER, THE RATE OF SHARE PREMIUM CHARGED BY THE ASSESSEE. DURING THE COURSE OF ASSESSMENT PROCEEDINGS THE AO DID NOT EXAMINE THIS ASPECT OF THE CASE AND COMPLETED THE ASSESSMENT PRO CEEDINGS. THUS, THE ACTION OF THE AO IS ERRONEOUS AND PREJUDICIAL TO TH E INTEREST O REVENUE. IT MAY KINDLY BE APPRECIATED THAT THE NOTICE U/S 2 63 OF THE ACT WAS ISSUED PROPOSING TO TREAT THE INCOME OF THE ASSESSE E U/S 56(2)(VIIB) OF THE ACT BEING EXCESS PREMIUMRECEIVED BY THE COMPANY OVE R DCF METHOD FROM TWO NON-RESIDENT COMPANIES AT RS.14,88,48,680/ - (AS TABULATED). M/S RUCHI J OIL PVT. LTD ITA NO.176/IND/2020 21 CONTRARY TO THIS, IN AFORESAID CONCLUSION, HE OBSER VED THAT THE TRACK RECORD OF PROMOTER GROUP I.E. M/S. RUCHI SOYA INDUS TRIES LTD DID NOT JUSTIFY THE RATE OF SHARE PREMIUM CHARGED BY THE CO MPANY, WHICH WAS NOT EXAMINED BY THE AO. HE IGNORED THE FACT THAT TH E SHARE VALUATION WAS BASED ON DCF METHOD PERMITTED UNDER RULE 11UA OF INCOME TAX RULES, WHICH WAS ACCEPTED ALL ALONG INCLUDING IN TH E NOTICE ISSUED U/S 263 OF THE ACT.THUS, HE ISSUED THE DIRECTIONS TO VE RIFY RATE OF PREMIUM ON SHARES ISSUED BY THE COMPANY TO M/S. RUCHI SOYA IND USTRIES AS WELL TWO NON-RESIDENT COMPANIES. KIND ATTENTION IS INVITED T O THE JUDGMENT IN THE CASE OF CIT VS. ASHISH RAJPAL (2010) 320 ITR 674 (D EL.) WHEREIN IT WAS HELD AS UNDER :- WHETHER WHERE NOTICE ISSUED BY THE COMMIS SIONER BEFORE COMMENCING PROCEEDINGS U/S 263 REFERRED TO FOUR ISS UES AND FINAL ORDER PASSED REFERRED TO NINE ISSUES, REVISIONAL PROCEEDI NGS WERE VITIATED AS A RESULT OF BEACH OF PRINCIPALS OF NATURAL JUSTICE HELD YES. IT MAY PLEASE BE APPRECIATED THAT,WHEN THE PROVISIO NS OF SECTION 56(2(VIIB) OF THE ACT WERE NOT AT ALL APPLICABLE IN RELATION TO SHARES ISSUED AT A PREMIUM TO ANY NON-RESIDENT, NO ERROR WAS COM MITTED BY THE AO WHATSOEVER WHILE COMPLETING THE ASSESSMENT.WE ALSO HUMBLY SUBMIT THAT LD. PR.CIT DID NOT APPLY HIS MIND ON THE DOCUM ENTS AVAILABLE ON RECORD WHEN IT WAS SPECIFICALLY ARGUED THAT PROVISI ONS OF SECTION 56(2)(VIIB) OF THE ACT WERE NOT APPLICABLE IN A CAS E WHERE SHARES ARE ISSUED AT A PREMIUM TO NON-RESIDENT. THIS FACT WAS OVERLOOKED BY HIM WHILE PASSING THE ORDER U/S 263 OF THE ACT. IT IS THEREFORE, PRAYED THAT NONE OF THE CONDITIONS FOR INVOKING THE PROVISIONS OF SECTION 263 THE ASSESSMENT ORDER IS SATISFIED & THE ORDER PASSED U/S 263 OF THE ACT, DESERVES TO BE QUASHED. M/S RUCHI J OIL PVT. LTD ITA NO.176/IND/2020 22 8. PER CONTRA LD. DEPARTMENTAL REPRESENTATIVE VE HEMENTLY ARGUED SUPPORTING THE ORDER OF LD. PCIT AND ALSO COULD NOT CONTROVERT THE FACT THAT THE PROVISIONS OF SECTION 56(2)(VIIB) OF THE ACT ARE NOT APPLICABLE FOR THE CONSIDERATION FOR ISSUE OF SHARE S RECEIVED FROM NON RESIDENT COMPANIES. 9. WE HAVE HEARD RIVAL CONTENTIONS AND PERUSED THE RECORDS PLACED BEFORE US AND CAREFULLY GONE THROUGH THE DEC ISIONS REFERRED AND RELIED BY THE LD. COUNSEL FOR THE ASSESSEE. T HE ASSESSEE HAS RAISED 3 GROUNDS OF APPEAL AND THE EFFECTIVE GROUND S ARE GROUND NO. 1 & 2 THROUGH WHICH THE JURISDICTION ASSUMED BY LD. PCIT U/S 263 OF THE ACT HAS BEEN CHALLENGED MAINLY ON THE GR OUND THAT THE PROVISIONS OF SECTION 56(2)(VIIB) OF THE ACT ARE NO T APPLICABLE TO THE NON RESIDENTS. THOUGH IN THE WRITTEN SUBMISSIONS F ILED BY THE ASSESSEE IT IS ALSO BEEN CONTENDED THAT THE LD. A.O HAS DISCUSSED THE ISSUE OF SHARE CAPITAL RECEIVED FROM NON RESIDE NT COMPANIES IN DEPTH AND IT IS NOT THE CASE OF NO ENQUIRY. M/S RUCHI J OIL PVT. LTD ITA NO.176/IND/2020 23 10. WE OBSERVE THAT DURING THE YEAR UNDER APPEAL AS SESSEE ISSUED EQUITY SHARES TO THE RESIDENT AND NON RESIDENT COMP ANIES. AS PER THE DISCOUNTED CASH FLOW (DCF) METHOD PROVIDED UND ER RULE 11UA(2B) OF THE I.T. RULES FAIR MARKET VALUE PER EQ UITY SHARE WAS COMPUTED BY THE CHARTERED ACCOUNTANT AT RS.2061.35. ASSESSEE COMPANY ISSUED 204000 EQUITY SHARES AT RS.2061.35 P ER SHARE (FACE VALUE PER SHARE RS.10/- AND SHARE PREMIUM AT RS. 2051.35) TO A RESIDENT COMPANY NAMELY RUCHI SOYA INDUSTRIES LTD . HOWEVER FOLLOWING SHARES WERE ISSUED TO NON RESIDENT COMPA NIES AT A PRICE OF RS.2840.68 PER SHARE ( FACE VALUE PER SHARE RS.1 0/- AND SHARE PREMIUM AT RS. 2830.68):- NAME OF COMPANY NO. OF EQUITY SHARES AMOUNT TOYOTA TSUSHO,JAPAN 92000 261342560 J OIL MILLS INC, JAPAN 104000 295430720 556773280 11. LD. PCIT IN THE IMPUGNED ORDER HAS REFERRED TO THE ABOVE TRANSACTIONS AND CAME TO A CONCLUSION THAT WHEN TH E VALUE OF EACH SHARE COMPUTED BY DCF METHOD IS RS. 2061.35 AND EXC ESS M/S RUCHI J OIL PVT. LTD ITA NO.176/IND/2020 24 PREMIUM OF RS. 779.33 PER HAS BEEN CHARGED TO NON R ESIDENT COMPANIES AND THEN WHY IT HAS NOT BEEN ADDED TO THE INCOME OF THE ASSESSEE BY LD. A.O U/S 56(2)(VIIB) OF THE ACT. LD . PCIT FURTHER HELD THAT SINCE THE LD. A.O DID NOT EXAMINE THIS ASPECT OF THE CASE RELATING TO EXCESS SHARE PREMIUM CHARGED TO NON RES IDENT COMPANIES, ORDER OF THE LD. A.O IS ERRONEOUS AND P REJUDICIAL TO THE INTEREST OF REVENUE AND DESERVES TO BE SET ASIDE. 12. NOW IN THE INSTANT APPEAL AFTER CONSIDERING THE ABOVE STATED FACTS AND THE FINDING OF LD. PCIT IN THE IMPUGNED O RDER FOLLOWING TWO ISSUES NEEDS TO BE EXAMINED :- (1) WHETHER THE PROVISIONS OF SECTION 56(2)(VIIB) OF THE ACT IS APPLICABLE FOR THE CONSIDERATION RECEIVED FOR ALLOTMENT OF EQUITY SHARES TO NON RESIDENT COMPANY; (2) WHETHER THE LD. A.O CONDUCTED ENQUIRY WITH REG ARD TO THE ALLEGED TRANSACTION OF ISSUE OF EQUITY SHARES TO NON RESIDENT PERSONS DURING THE YEAR. M/S RUCHI J OIL PVT. LTD ITA NO.176/IND/2020 25 13. AS REGARDS THE FIRST ISSUE IS CONCERNED WE WILL FIRST GO THROUGH THE PROVISIONS OF SECTION 56(2)(VIIB) OF THE ACT WH ICH READS AS FOLLOWS:- (VIIB) WHERE A COMPANY, NOT BEING A COMPANY IN WHI CH THE PUBLIC ARE SUBSTANTIALLY INTERESTED, RECEIVES, IN ANY PREVIOUS YEAR, FROM ANY PERSON BEING A RESIDENT, ANY CONSIDERATION FOR ISSUE OF SH ARES THAT EXCEEDS THE FACE VALUE OF SUCH SHARES, THE AGGREGATE CONSIDERATION R ECEIVED FOR SUCH SHARES AS EXCEEDS THE FAIR MARKET VALUE OF THE SHARES: PROVIDED THAT THIS CLAUSE SHALL NOT APPLY WHERE THE CONSIDER ATION FOR ISSUE OF SHARES IS RECEIVED (I) BY A VENTURE CAPITAL UNDERTAKING FROM A VENTU RE CAPITAL COMPANY OR A VENTURE CAPITAL FUND 67 [ OR A SPECIFIED FUND ] ; OR (II) BY A COMPANY FROM A CLASS OR CLASSES OF PERSO NS AS MAY BE NOTIFIED BY THE CENTRAL GOVERNMENT IN THIS BEHALF. 14. FROM PERUSAL OF THE ABOVE SECTION IT IS VERY MU CH CLEAR THAT IT REFERS TO THE CONSIDERATION FOR ISSUE OF SHARES REC EIVED FROM ANY PERSON BEING RESIDENT. THE PROVISION IS VERY CLEAR AND THERE CANNOT BE ANY SECOND OPINION TO THIS ASPECT THAT SE CTION 56(2)(VIIB) OF THE ACT APPLIES ONLY TO RESIDENTS. THE ISSUE IN THE INSTANT APPEAL RELATES TO ALLOTMENT OF EQUITY SHARES TO NON RESIDE NT COMPANIES. AS PER DCF METHOD VALUE OF EQUITY SHARE IS AT RS.2061. 35 BUT THE EQUITY SHARES ALLOTTED TO NON RESIDENT IS AT RS.284 0.68. IN THE SHOW CAUSE NOTICE ISSUED, LD. PCIT HAS ONLY REFERRED T O THE PROVISIONS OF SECTION 56(2) OF THE ACT STATING THAT THE EXCESS AMOUNT RECEIVED M/S RUCHI J OIL PVT. LTD ITA NO.176/IND/2020 26 FROM TWO NON RESIDENT COMPANIES ON ALLOTMENT OF SHA RES SHOULD BE TREATED AS INCOME OF THE ASSESSEE U/S 56(2)(VIIB) OF THE I.T. ACT: SO THE FINDING OF LD. PCIT IS ONLY TO THE EFFECT THAT LD. A.O SHOULD HAVE EXAMINED THE TRANSACTION OF EXCESS PREMIUM RECEIVE D FROM NON RESIDENT COMPANIES WHICH NEEDS TO BE BROUGHT TO TAX U/S 56(2)(VIIB) OF THE ACT. HOWEVER WE ARE OF THE CONS IDERED VIEW THAT THIS FINDING OF LD. PCIT IS FACTUALLY INCORRECT AND IS NOT SUSTAINABLE IN LAW SINCE THE PROVISIONS OF SECTION 56(2)(VIIB) OF THE ACT ARE NOT APPLICABLE TO THE CONSIDERATION RECEIVED FROM NON R ESIDENTS FOR ISSUING OF SHARES. LD. DEPARTMENTAL REPRESENTATIVE WAS FAIR ENOUGH TO ACCEPT THIS FACT THAT SECTION 56(2)(VIIB) OF THE ACT S ONLY APPLICABLE TO RESIDENTS AND NOT TO NON RESIDENTS. THEREFORE SINCE THE VERY BASIS OF ISSUE OF SHOW CAUSE NOTICE U/S 263 OF THE ACT IS FACTUALLY INCORRECT AND THE PROVISIONS OF SECTION 5 6(2)(VIIB) OF THE ACT HAS BEEN WRONGLY INTERPRETED BY LD. PCIT BY DIR ECTING THE LD. A.O TO TAX AN AMOUNT UNDER A SECTION NAMELY 56(2)(V IIB) FOR THE CONSIDERATION RECEIVED FOR ISSUE OF EQUITY SHARES W HICH IS NOT APPLICABLE TO THE NON RESIDENTS, THE PROCEEDINGS U/ S 263 OF THE ACT M/S RUCHI J OIL PVT. LTD ITA NO.176/IND/2020 27 DESERVES TO BE QUASHED. WE ACCORDINGLY ORDER SO. 15. AS REGARDS THE SECOND ISSUE IS CONCERNED WHETHE R THE LD. A.O HAS MADE SUFFICIENT ENQUIRY WITH REGARD TO THE ALLE GED TRANSACTION OF ALLOTMENT OF EQUITY SHARES TO RESIDENT AND NON R ESIDENT COMPANIES, WE FIND THAT WHEN THE CASE WAS SELECTED FOR SCRUTINY PROCEEDINGS LD. A.O ISSUED NOTICE U/S 142(1) OF THE ACT AND IN PARA 4 OF THIS NOTICE SPECIFIC INFORMATION WAS CALLED FO R PROVIDING COMPLETE DETAILS OF SHARE PREMIUM RECEIVED AT RS.95 ,27,75,180/-. IN REPLY THE ASSESSEE FILED NECESSARY DETAILS ON 15 .6.2016 ATTACHING ANNEXURE-II PROVIDING DETAILS OF LIST OF SHARE HOLD ERS AS ON 31.3.2014 AND EQUITY SHARES ISSUED DURING THE YEAR. THIS REPLY ALSO INCLUDED SPECIFIC INFORMATION ABOUT THE CONSID ERATION RECEIVED FROM NON RESIDENT COMPANIES FOR ALLOTMENT OF 196000 SHARES INCLUDING CERTIFICATE OF FOREIGN REMITTANCES BY BAN K OF TOKYO, CERTIFICATE OF FOREIGN REMITTANCE BY M/S MIZUHO BAN K LIMITED, COPY OF LETTER DATED 11.3.2014 TO HDFC BANK REGARDING FO REIGN DIRECT INVESTMENT (FDI), COPY OF BOARDS RESOLUTION REGARD ING ALLOTMENT OF SHARES TO FDI AND COPY OF CERTIFICATE ISSUED BY COM PANY SECRETARY M/S RUCHI J OIL PVT. LTD ITA NO.176/IND/2020 28 REGARDING ISSUE OF SHARES AT A PREMIUM TO NON RESID ENT WHICH IS TO BE GIVEN TO RBI. 16. WE FURTHER OBSERVE THAT LD. A.O AFTER RECEIVING THE ABOVE STATED REPLY REFERRED THE MATTER TO TRANSFER PRICIN G OFFICER U/S 92(CA)(1) OF THE ACT FOR COMPUTING THE ARMS LENGTH PRICE OF THE INTERNATIONAL TRANSACTION ENTERED INTO WITH TOYOTO TSUSHO AND J OIL MILLS FOR ALLOTMENT OF EQUITY SHARES AT A PREMIUM FOR TOTAL CONSIDERATION OF RS.55,67,73,280/-. LD. TPO HAS AL SO EXAMINED THE TRANSACTION AND AFTER PERUSING THE RECORDS CONCLUDE D THAT NO ADJUSTMENT IS REQUIRED TO BE MADE TO THE ARMS LENG TH PRICE OF THE TRANSACTION. IN OTHER WORDS THE TRANSACTION WITH NO N RESIDENT COMPANY WERE ACCEPTED AT A FAIR MARKET VALUE REQUIR ING NO ADJUSTMENT. AFTER RECEIVING THE ORDER U/S 92CA(3) OF THE ACT LD. A.O FURTHER DISCUSSED THE TRANSACTION OF ISSUANCE O F SHARE CAPITAL TO THE TWO NON RESIDENT COMPANIES AND SINCE LD. TPO DI D NOT MAKE ANY ADJUSTMENT TO THE VALUE OF TRANSACTION THE SAME WAS ACCEPTED BY THE LD. A.O. M/S RUCHI J OIL PVT. LTD ITA NO.176/IND/2020 29 17. IN VIEW OF THE ABOVE FACTS IN OUR UNDERSTANDING THERE WAS A SPECIFIC ENQUIRY FROM THE LD. A.O TO WHICH THE SPEC IFIC REPLY ALONG WITH SUPPORTING DOCUMENTS WERE SUBMITTED BY THE ASS ESSEE DURING THE COURSE OF SCRUTINY ASSESSMENT PROCEEDINGS ITSEL F. IT CAN BE SAFELY CONCLUDED THAT THE LD. A.O HAD RAISED QUERIE S WHICH WERE COMPLIED BY THE ASSESSEE. CONSIDERING THESE FACTS IN TOTALITY, IT CAN BE SAFELY CONCLUDED THAT THE ASSESSING OFFICER MADE COMPLETE ENQUIRY REGARDING SHARE CAPITAL AND SHARE PREMIUM R ECEIVED FROM NON RESIDENT COMPANIES AND ALSO CALLED FOR A REPORT FROM LD. TPO ON THE ARMS LENGTH PRICE OF THIS INTERNATIONAL TRAN SACTION. IT IS A SETTLED POSITION OF LAW THAT THE POWERS UNDER SECTI ON 263 OF THE ACT CAN BE EXERCISED BY THE COMMISSIONER ON SATISFACTIO N OF TWIN CONDITIONS, I. E., THE ASSESSMENT ORDER SHOULD BE E RRONEOUS AND PREJUDICIAL TO THE INTERESTS OF THE REVENUE. BY 'ER RONEOUS' IS MEANT CONTRARY TO LAW. THUS, THIS POWER CANNOT BE EXERCIS ED UNLESS THE COMMISSIONER IS ABLE TO ESTABLISH THAT THE ORDER OF THE ASSESSING OFFICER IS ERRONEOUS AND PREJUDICIAL TO THE INTERES TS OF THE REVENUE. THUS, WHERE THERE ARE TWO POSSIBLE VIEWS AND THE AS SESSING OFFICER M/S RUCHI J OIL PVT. LTD ITA NO.176/IND/2020 30 HAS TAKEN ONE OF THE POSSIBLE VIEWS, NO ACTION TO E XERCISE POWERS OF REVISION CAN ARISE, NOR CAN REVISIONAL POWER BE EXE RCISED FOR DIRECTING A FULLER ENQUIRY TO FIND OUT IF THE VIEW TAKEN IS ERRONEOUS. THIS POWER OF REVISION CAN BE EXERCISED ONLY WHERE NO ENQUIRY, AS REQUIRED UNDER THE LAW, IS DONE. IT IS NOT OPEN TO ENQUIRE IN CASE OF INADEQUATE INQUIRY. OUR VIEW IS FORTIFIED BY THE DE CISION OF THE HON'BLE HIGH COURT OF BOMBAY IN THE CASE OF C IT V. NIRAV MODI [2017] 390 ITR 292 (BORN) ; [2016] 71 TAXMANN.COM 272 (BORN).' THE HON'BLE BOMBAY HIGH COURT IN THE CASE OF CIT V. GABRIEL INDIA LTD. [1993] 203 ITR 108 (BORN) HAS HELD THAT: 'THE DECISION OF THE INCOME-TAX OFFICER CANNOT BE H ELD TO BE ERRONEOUS SIMPLY BECAUSE IN HIS ORDER HE DID NOT MADE AN ELABORATE DISCUSSION IN THIS REGARD . . . . .' THE HON'BLE GUJARAT HIGH COURT IN THE CASE OF MICRO INKS LTD. V. PR. CIT [2018] 407 ITR 681 (GUJ) ; 85 TAXMANN.COM 310 HAS HELD THAT : 'IF THE ASSESSING OFFICER HAS ADOPTED A VIEW WHICH IS A PLAUSIBLE ONE, THE VIEW WOULD NOT BE OPEN TO REVISION BY TH E COMMISSIONER.' M/S RUCHI J OIL PVT. LTD ITA NO.176/IND/2020 31 18. CONSIDERING THE FACTS OF THE CASE IN THE LIGHT OF T HE JUDICIAL DECISIONS DISCUSSED HEREINABOVE AND ON A PERUSAL OF THE FACTS, WE HAVE NO HESITATION IN HOLDING THAT THE ASSESSMENT U NDER SECTION 143(3) OF THE ACT WAS FRAMED AFTER DETAILED ENQUIRI ES CANNOT BE CONSIDERED AS ERRONEOUS AND PREJUDICIAL TO THE INTE RESTS OF THE REVENUE. 19. IN THE INSTANT CASE ALSO LD. A.O HAD CONSIDERED VARIOUS SUBMISSIONS OF THE ASSESSEE AND TAKEN A POSSIBLE VI EW. THEREFORE MERELY BECAUSE LD. PCIT DID NOT AGREE TO THE OPINIO N/INFORMATION OF THE LD. A.O WHO HAS CONDUCTED SUFFICIENT ENQUIRY R EGARDING THE ISSUE RAISED IN THIS SHOW CAUSE NOTICE ISSUED BY LD . PCIT, PROVISIONS OF SECTION 263 OF THE ACT CANNOT BE INVO KED IN ORDER TO SUBSTITUTE HIS OWN INFORMATION. IT HAS BEEN HELD I N SEVERAL DECISIONS (FEW OF THEM HAVE BEEN RELIED BY THE LD. COUNSEL ALSO) THAT IF THE LD. A.O HAS MADE ENQUIRY TO HIS SATISFA CTION AND IT IS NOT A CASE OF NO ENQUIRY THEN LD. PCIT CANNOT ASSUME TH E JURISDICTION U/S 263 OF THE ACT TO AGAIN INVESTIGATE OR APPROACH IN A PARTICULAR MANNER. THEREFORE ON THIS ASPECT ALSO THE ASSESSE E DESERVES TO M/S RUCHI J OIL PVT. LTD ITA NO.176/IND/2020 32 SUCCEED AND THE IMPUGNED ORDER U/S 263 OF THE ACT DESERVES TO BE QUASHED SINCE THERE WAS A DETAILED ENQUIRY BY THE L D. A.O AND AFTER THOROUGHLY DISCUSSING THE ISSUE IN THE ASSESSMENT O RDER TAKING A PERMISSIBLE VIEW WITHIN THE PARAMETERS OF THE LAW, THERE REMAINS NO ROOM FOR LD. PCIT TO ASSUME THE JURISDICTION U/S 26 3 OF THE ACT. 20. THUS IN VIEW OF OUR DISCUSSION MADE HEREIN ABOV E WE HEREBY QUASH THE ORDER OF LD. PCIT FRAMED U/S 263 OF THE A CT AND RESTORE THE ORDER OF THE LD. A.O FRAMED U/S 143(3) R.W.S. 9 2CA(3) OF THE ACT DATED 27.12.2017. GROUND NO. 1 & 2 OF THE ASSESSEE ARE ALLOWED. 21. GROUND NO.3 IS GENERAL IN NATURE WHICH NEEDS NO ADJUDICATION. 22. IN THE RESULT APPEAL OF THE ASSESSEE IS ALLOWED . ORDER WAS PRONOUNCED IN THE OPEN COURT ON 25.03. 2021. SD/- SD/- (KUL BHARAT) (MANISH BORAD) JUDICIAL MEMBER ACCOUNTANT MEMBER INDORE; DATED : 25 TH MARCH, 2021 /DEV M/S RUCHI J OIL PVT. LTD ITA NO.176/IND/2020 33 COPY TO: ASSESSEE/AO/PR. CIT/ CIT (A)/ITAT (DR)/GUA RD FILE. BY ORDER ASSISTANT REGISTRAR, INDORE