INSTANT HOLDINGS LTD, MUMBAI V. PR CIT (ADMN) 6, MUMBAI

ITA 2374/MUM/2015

• Counselvise Citation: [2016] 132 COUNSELVISE.COM (IT) 4042 (ITAT-MUMBAI)
• Duration Of Justice: 11 month(s) 23 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 20-04-2016
• Appeal Filed By: Department
• Bench Allotted: I
• Next Hearing Date: 02-12-2015
• Assessment Year: 2011-2012
• Appeal Filed On: 27-04-2015
• Court: TRIBUNAL
• Assessee Lawyers: B C S NAIK
• Keywords: Cost of acquisition; Fair market value; Valuation report; Capital receipt
• Section: 143(3); 263

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL I BENCH, MUMBAI BEFORE SHRI D. KARUNAKARA RAO, ACCOUNTANT MEMBER AND SHRI SANDEEP GOSAIN, JUDICIAL MEMBER I.T.A. NO.2374 /M/2015 (ASSESSMENT YEAR: 2011 - 201 2 ) INSTANT HOLDINGS LTD., 213, BEZZOLA COMPLEX, B WING, 71, SION TROMBAY ROAD, CHEMBUR, MUMBAI 400 071. / VS. PRINCIPAL COMMISSIONER OF INCOME TAX (ADMN.) - 6, MUMBAI. ./ PAN : AACCK5600M ( / APPELLANT) .. ( / RESPONDENT ) / APPELLANT BY : SHRI VIJAY MEHTA / RESPONDENT BY : SHRI B.C.S. NAIK, CIT - DR / DATE OF HEARING : 19.02.2016 / DATE OF PRONOUNCEMENT : 20.04 .2016 / O R D E R PER D. KARUNAKARA RAO, AM: THIS APPEAL FILED BY THE ASSESSEE ON 27.4.2015 IS AGAINST THE ORDER OF THE CIT - 6, DATED 31.3.2015 FOR THE ASSESSMENT YEAR 2011 - 2012 PASSED U/S 263 OF THE ACT. IN THIS APPEAL, ASSESSEE RAISED THE FOLLOWING GROUNDS WHICH READ AS UNDER: - 1. ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE AND IN LAW, THE HONBLE CIT ERRED IN INVOKING THE PROVISIONS OF SECTION 263 OF THE ACT IN THE APPELLANTS CASE. THE APPELLANT PRAYS THAT THE ORDER OF THE CIT UNDER SECTION 263 OF THE ACT MAY KINDLY BE QUASHED AND THE ASSESSMENT ORDER OF THE AO DATED 19.3.2014 MAY BE RESTORED. 2. ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE AND IN LAW, THE HONBLE CIT ERRED IN SETTING ASIDE THE APPELLANTS CASE BACK TO THE LD A O FOR MAKING A FRESH ASSESSMENT BY HOLDING THAT THE ASSESSMENT ORDER DATED 19.3.2014 MADE BY THE AO IS ERRONEOUS AND PREJUDICIAL TO THE INTEREST OF THE REVENUE. FURTHER, THE AO ERRED IN MAKING VARIOUS OBSERVATIONS AND GIVING VARIOUS FINDINGS WITHOUT ANY CORROBORATIVE EVIDENCE AND / OR CONT RARY TO SUCH EVIDENCE AND / OR WITHOUT ANY BASIS IS REACHING THE ABOVE CONCLUSIONS. THE APPELLANT PRAYS THAT THE ORDER OF THE CIT UNDER SECTION 263 OF THE ACT MAY KINDLY BE QUASHED AND THE ASSESSMENT ORDER OF THE AO DATED 19.3.2014 MAY BE RESTORED. 2. BR IEFLY STATED RELEVANT FACTS ARE THAT THE ASSESSEE IS A NON - BANKING FINANCE INSTITUTE (NBFI) AND FILED THE RETURN OF INCOME ORIGINALLY ON 28.09.2011 DECLARING THE TOTAL INCOME OF RS. 9.9 LAKHS (ROUNDED OFF) UNDER THE NORMAL PROVISIONS AND RS. 45 2 LAKHS UNDER THE MAT PROVISIONS. IN THE RETURN OF INCOME, ASSESSEE CLAIMED LONG TERM CAPITAL GAINS OF RS. 20.27 CRS (ROUNDED OFF) AND THE SHORT TERM CAPITAL GAINS OF RS. 18.90 LAKHS (ROUNDED OFF). AO SCRUTINIZED THE RETURN OF INCOME AND ALLOWED THE CLAIMS OF THE ASS ESSEE. IN THE ASSESSMENT, AO DETERMINED THE TAXES OF RS. 3,05,879/ - UNDER THE NORMAL PROVISIONS AND RS. 8,34,128/ - UNDER THE MAT PROVISIONS. UNDER SECTION 263 OF THE ACT, PRINCIPAL CIT ISSUED SHOW CAUSE NOTICE AND EVENTUALLY PASSED REVISIONS ORDER DATED 31.3.2015 AND SET ASIDE THE ASSESSMENT ORDER DATED 19.3.2014. PRINCIPAL CIT DIRECTED THE AO TO REDO THE ASSESSMENT AS PER THE CONTENTS OF PARA 19 OF HIS ORDER. IN THIS REGARD, ASSESSEE FILED AN APPEAL BEFORE US WITH THE FOLLOWING GROUNDS: - 1. ON THE FAC TS AND IN THE CIRCUMSTANCES OF THE CASE AND IN LAW, THE HONBLE CIT ERRED IN INVOKING THE PROVISIONS OF SECTION 263 OF THE ACT IN THE APPELLANTS CASE. THE APPELLANT PRAYS THAT THE ORDER OF THE CIT U/S 263 OF THE ACT MAY BE KINDLY QUASHED AND THE ASSESSME NT ORDER OF THE AO DATED 19.3.2014 MAY BE RESTORED. 2. ON THE FACTS AIN THE CIRCUMSTANCES OF THE CASE AND IN LAW, THE HONBLE CIT ERRED IN SETTING ASIDE THE APPELLANTS CASE BACK TO THE LD AO FOR MAKING A FRESH ASSESSMENT BY HOLDING THAT THE ASSESSMENT ORD ER DATED 19.3.2014 MADE BY THE AO IS ERRONEOUS AND PREJUDICIAL TO THE INTEREST OF THE REVENUE. FURTHER, THE AO ERRED IN MAKING VARIOUS OBSERVATIONS AND GIVING VARIOUS FINDINGS WITHOUT ANY CORROBORATIVE EVIDENCE AND / OR CONTRARY TO SUCH EVIDENCE AND / OR WITHOUT ANY BASIS IN REACHING THE ABOVE CONCLUSIONS. THE APPELLANT PRAYS THAT THE ORDER OF THE CIT UNDER SECTION 263 OF THE ACT MAY KINDLY BE QUASHED AND THE ASSESSMENT ORDER OF THE AO DATED 19.3.2014 MAY BE RESTORED. 3. THE BACKGROUND FACTS RELEVANT FOR THE ADJUDICATION OF THESE GROUNDS INCLUDE THAT THE ASSESSEE HAVING SHARES RECORDED IN THE BOOKS OF ACCOUNTS. THESE SHARES ACQUIRED BY THE ASSESSEE FROM THE ORIGINAL OWNER OF CEAT LTD THROUGH RIFL. THE ACQUISITION OF THE SHARES BY THE ASSESSEE THROUGH THE ABOVE SAID AGENCIES WAS APPROVED BY THE JURISDICTIONAL HIGH COURT IN CONNECTION WITH THE CLAIM OF AMALGAMATION, AS A PART OF THE BUSINESS REENGINEERING. THERE ARE THREE SUCH LOTS OF SHARES INVOLVING THREE COMPANIES NAMEL Y, CESC; SAREGAMA AND PHILIPS CARBON BLACK LTD. THESE SHARES WERE SUBSEQUENTLY SOLD TO UJALA AGENCY P LTD; GOODLUCK DEALCOM PVT LTD AND REPORTED THE LTCGS IN SOME TRANSACTIONS AND LONG TERM CAPITAL LOSS IN OTHERS DEPENDING ON THE DATE OF SALE AND THE WAY ASSESSEE CONSIDERED THE VALUE OF THE ACQUISITION OF THE SHARES. ASSESSEE INVOKED THE PROVISIONS OF SECTION 49(1) OF THE ACT THAT DEALS WITH COST OF AN ASSET IN THE HANDS OF THE ORIGINAL OWNER. THE SHARES OF CESC LTD WERE SOLD ON 17.8.2010. THE COST OF THE SHARES, PURCHASED 3 FROM M/S. SUMMIT SECURITIES LTD, WERE VALUED AT THE PREVIOUS OWNER INVOKING THE PROVISIONS OF SECTION 49(1)(III)(E) READ WITH SECTION 47(IV) OF THE ACT. ASSESSEE NOTED THE CAPITAL GAINS AGAINST THE CAPITAL LOSS AND THE SAID LOSS WAS CLAIMED FOR CARRY FORWARDING BENEFITS. THE LONG TERM CAPITAL LOSS REPORTED IN THE RETURN OF INCOME WORKED OUT TO RS. 20,27,13,990/ - . THE SHORT TERM CAPITAL GAINS IS RS. 18,89,591/ - . AFTER EXAMINING THE ABOVE FACTS, THE PRINCIPAL CIT CAME TO THE CONCLUSI ON THAT THE AO DID NOT CONDUCT WORTHWHILE INQUIRIES WHICH HE SHOULD HAVE DONE CONSIDERING THE RELATED PARTIES INVOLVED IN THESE PURCHASE AND SALE TRANSACTIONS. IN ADDITION, THERE IS ANOTHER ISSUE OF PREMIUM. IN THE EARLIER ASSESSMENT YEAR 2010 - 2011, ASSE SSEE PURCHASED CERTAIN SHARES FOR RS. 45.31 CRS AND DID NOT MAKE THE PAYMENTS IN THAT YEAR. THE SAME SHOWN AS OUTSTANDING LIABILITY AND THE SAME IS IN CONNECTION WITH THE BENEFICIAL INTEREST IN THE RIFL. IN CONNECTION WITH THE REPAYMENT OF THE ABOVE OUTS TANDING LIABILITIES, ASSESSEE DEVISES METHOD OF REPAYMENT OF THE SAME BY WAY OF FLOATING THE RIGHTS ISSUE WITH THE PREMIUM OF RS. 715/ - PER SHARE. IT IS THE ALLEGATION OF THE PRINCIPAL CIT THAT THE AO FAILED TO EXAMINE THIS ISSUE BY CONDUCTING MEANINGFUL INQUIRIES. 4. AFTER GOING THROUGH THE REVISION ORDER OF THE PRINCIPAL CIT AND THE ARGUMENTS OF THE LD DR FOR THE REVENUE THE FOLLOWING ARE THE ISSUES AND THE LIST OF ALLEGATIONS ARE AS UNDER: (1) AO DID NOT EXAMINE ANY ASPECT WITH REGARD TO THE COST OF ACQUISI TION; (2) AO DID NOT MAKE ANY INQUIRIES REGARD THE REASONABLENESS OF EXORBITANT PREMIUM OF RS. 715/ - PER SHARE; (3) AO DID NOT APPLY HIS MIND TO THE TRANSACTION OF SALE OF SHARES ON 7.8.2010 TO UJALA AGENCY PVT LTD AND GOODLUCK DEALCOM PVT LTD. THE SALE OF SHARES FOR A SUM OF RS. 46.93 CRS IS TOO LOW WH EREAS THE MARKET PRICE OF THE SHARES IS AROUND RS. 1 28. 96 CRS. (4) AO DID NOT RAISE ANY QUERY ON THE REASONS FOR TRANSFERRING THE SHARES AT SUCH LOW PRICE TO THE RELATED PARTIES WHICH YIELDED SHORT TERM CAPITAL LOSS O F RS. 20 CRS. (5) IN CONNECTION WITH SALE OF SHARES, THE AO DID NOT APPLY HIS MIND REGARDING THE APPLICABILITY OF THE PROVISIONS OF SECTION 47(IV) OF THE ACT. (6) AO DID NOT EXAMINE THE SUBSTANCE OF THE TRANSACTIONS WHICH INVOLVED DEVIATION OF THE RPG GOENKA GRO UP OF COMPANIES BETWEEN TWO BROTHERS IE SHRI HARSH GOENKA AND SHRI SANJIV GOENKA. (7) ACCEPTING A PROVISION RECEIVABLE FROM M/S. OFFSHORE INDIA LTD; FAIR MARKET VALUATION REPORT; REVALUATION OF DISTRIBUTION OF SHARES BETWEEN HML AND STEL ETC ARE THE ISSUES. 4 SOME OF THE ABOVE ISSUES ARE RAISED FOR THE FIRST TIME BY THE LD DR BEFORE US. IN RESPONSE, LD COUNSEL FOR THE ASSESSEE FILED A WRITTEN SUBMISSION DEALING WITH EACH OF THE ABOVE SAID ALLEGATION AND THE BRIEF SUMMARY OF THE ISSUES ARE DISCUSSED AS UNDER: - 5. REGARDING THE ALLEGATION OF THE AOS VALUATION WITH REGARD TO THE COST OF ACQUISITION, LD COUNSEL FOR THE ASSESSEE BROUGHT OUR ATTENTION TO THE WRITTEN SUBMISSIONS AND THE EVIDENCES FURNISHED ALONG WITH THE SAME. BRINGING OUR ATTENTION TO PAGES 68 TO 7 6 OF THE SAID WRITTEN SUBMISSION, LD COUNSEL FOR THE ASSESSEE SUBMITTED THAT THIS ASPECT OF COST OF ACQUISITION WAS DEEPLY EXAMINED BY THE AO. TO SUPPORT THE SAME, LD COUNSEL FOR THE ASSESSEE BROUGHT OUR ATTENTION TO THE ASSESSEES LETTER DATED 12.3.2014 (PLACED AT PAGE 68 OF THE PB), WHICH IS THE SUBJECT MATTER BEFORE THE DCIT - 6(2), MUMBAI FOR THE AY 2011 - 2012 AND DEMONSTRATED THE FACT OF ASSESSEE ACQUIRING OF SHARES IN THE SCHEME OF ARRANGEMENT AND ALSO THE DETAILS OF HOLDING PERIOD, APPLICABILITY OF THE PROVISIONS OF SECTION 49(1)(III)(E) READ WITH SECTION 47(IV) OF THE ACT. THERE IS A DETAILED DISCUSSION ABOUT THE MANNER IN WHICH THE ASSESSEE ACQUIRED THE SAID SHARES AND HOW THE COST IN THE PREVIOUS OWNERS HANDS NEEDS TO BE CONSIDERED IN THIS REGARD. DOCUMENTS PLACED AT PAGES 52, 53, 57, 58 OF THE PB SUPPORTS THE ABOVE. BRINGING OUR ATTENTION TO PAGES 62, 63, 65 AND 66 OF THE PB, LD COUNSEL FOR THE ASSESSEE DEMONSTRATED THAT THE SAME RELATES TO THE INVOICES SHOWING THE PURCHASES OF SHARES OF CESC LTD ; SAREGAMA AND PHILIPS CARBON BLACK LTD. THESE DOCUMENTS WERE AVAILABLE TO THE AO DURING THE ASSESSMENT PROCEEDINGS. THIS IS THE CASE OF THE LD COUNSEL FOR THE ASSESSEE THAT AO ISSUED QUESTIONNAIRE DATED 6.2.2014 CALLING FOR RELEVANT DETAILS ON THIS SPEC IFIC ISSUE. LD COUNSEL FOR THE ASSESSEE BROUGHT OUR ATTENTION TO PAGE 7 OF THE PB, WHICH CONSTITUTES DETAILED SUBMISSION DATED 19.2.2014 AND MENTIONED THAT THE AO EXAMINED THE ISSUE OF COST OF SHARES IN THE HANDS OF THE ASSESSEE. 6. REGARDING THE ALLEGATI ON RELATING TO THE EXORBITANT PREMIUM OF RS. 715/ - PER SHARE, LD COUNSEL FOR THE ASSESSEE BROUGHT OUR ATTENTION TO PAGE 10 OF THE PB AND SUBMITTED THAT THE ASSESSEE ISSUED EQUITY SHARES ON RIGHTS BASIS AT A ISSUE PRICE OF RS. 725/ - PER SHARE (WHICH INCLUDE S RS. 10/ - FACE VALUE) TO SETTLE THE AMOUNT PAYABLE TO SSL, WHICH INCLUDES THE AMOUNT PAYABLE IN CONNECTION WITH THE PURCHASE OF BENEFICIAL INTEREST IN RIFL AND BENEFIT TRUST, WHICH RELATES TO THE EARLIER AY 2010 - 5 2011. BRINGING OUR ATTENTION TO PAGE 10, I TEM NO.9, LD COUNSEL FOR THE ASSESSEE DEMONSTRATED THE FACT ABOUT THE ISSUING OF EQUITY SHARES ON RIGHTS BASIS TO SSL WAS INFORMED TO THE AO IN CONNECTION WITH QUESTION NO.9 OF THE QUESTIONNAIRE. BRINGING OUR ATTENTION TO PAGE 33 OF THE PB, WHICH CONSTITUT ES ANNEXURE - 3 RELATING TO THE DETAILS OF INCREASE IN THE SHARE CAPITAL, AND SUBMITTED THAT THE PREMIUM PER SHARE AT RS. 715/ - WAS GIVEN IN COLUMN NO.9 OF THE TABLE GIVEN ON THAT PAGE. WE EXAMINED THE SAME AND FOUND THE ASSESSEE SUBMITTED THE RELEVANT DETA ILS ON THIS PREMIUM ISSUE. IT IS THE ARGUMENT OF THE LD COUNSEL FOR THE ASSESSEE THAT THE SHARE PREMIUM ISSUE IS A TAX NEUTRAL AS THE SAME CONSTITUTES CAPITAL RECEIPTS. NO REVENUE LOSS CAN BE ATTRIBUTED TO THIS ISSUE OF PREMIUM. REFERRING TO THE APPLICA BILITY OF THE PROVISIONS OF SECTION 56(2)(VII)(B) OF THE ACT, LD COUNSEL FOR THE ASSESSEE MENTIONED THAT THE AFORESAID SECTION WOULD APPLY FROM THE AY 2013 - 2014 ONLY AND NOT TO THE AY UNDER CONSIDERATION. ASSESSEE INFORMED THE SAME TO THE AO AS PER THE WR ITTEN SUBMISSION DATED 14.3.2014 (PAGE 85, PARA D.2.1 OF THE PB). 7. REGARDING THE ALLEGATION OF SALE OF SHARES AT THE BELOW MARKET PRICE TO UJALA AGENCY PVT LTD AND GOODLUCK DEALCOM LTD, IT IS THE ARGUMENT OF THE LD DR THAT THE SAID SHARES WERE SOLD FOR A SUM OF RS. 46.93 CRS TO RELATED CONCERNS AGAINST THE MARKET RATE OF RS. 128.96 CRS. IN THIS REGARD, THE ARGUMENT OF THE LD COUNSEL FOR THE ASSESSEE IS THAT PRINCIPAL CIT AND CIT - DR REPLACE THE FULL VALUE OF SALE CONSIDERATION WITH FAIR MARKET VALUE, WH ICH IS NOT CORRECT AND SUSTAINABLE. ON THIS ISSUE, LD COUNSEL FOR THE ASSESSEE SUBMITTED THAT THIS ISSUE OF SALE CONSIDERATION WAS SUBJECT MATTER OF DEEP SCRUTINY BEFORE THE AO. IN THIS REGARD, BRINGING OUR ATTENTION TO THE ABOVE SAID LETTER DATED 14.3.2 014 (PAGE 77 OF THE PB), LD COUNSEL FOR THE ASSESSEE SUBMITTED THAT ASSESSEE EXPLAINED IN WRITING HOW AND WHY LONG TERM CAPITAL LOSS OF RS. 20.27 CRS ON SALE OF THE LISTED COMPANIES SHOULD NOT BE DISALLOWED. ASSESSING OFFICER IS AWARE OF THE CLAIM OF THE SAID LOSS OF RS. 20.27 CRS IN CONNECTION WITH THE SALE OF SHARES OF LISTED COMPANIES IE CSES LTD; SAREGAMA AND PHILIPS CARBON BLACK LTD. PAGE 78 OF THE PB DEALS WITH THE COST OF THE ACQUISITION OF THE SHARES AND PAGE 79 OF THE PB DEALS WITH THE SALE PRICE AND THE APPLICABILITY OF COORDINATE BENCH DECISION IN THE CASE OF RUPEE FINANCE & MANAGEMENT (P) LTD VS. ACIT, MUMBAI (120 ITD 539). THE SAID DECISION OF THE ITAT IS RELEVANT FOR THE PROPOSITION THAT THE AO IS NOT JUSTIFIED IN TAXING THE DIFFERENCE BETWEE N THE MARKET 6 PRICE AND THE TRANSFER PRICE OF THE SHARES AGREED BETWEEN THE PARTIES UNDER THE HEAD CAPITAL GAINS. SUCH ADDITION AS PROPOSED BY THE CIT WOULD BE A CASE OF ADDITION OF NOTIONAL INCOME IF FULL VALUE CONSIDERATION IS SUBSTITUTED WITH FAIR MARKE T VALUE. IN THIS REGARD, LD COUNSEL FOR THE ASSESSEE SUBMITTED THAT THE OFFICER CANNOT TEACH THE BUSINESSMAN AS TO BOW TO CONDUCT THE BUSINESS. RELYING ON THE COORDINATE BENCH DECISION IN THE CASE OF NARIMAN POINT BUILDING SERVICES AND TRADING PVT LTD (26 TAXMANN.COM 16), LD COUNSEL FOR THE ASSESSEE SUBMITTED THAT SECTION 48 DOES NOT HAVE ANY REFERENCE TO THE MARKET VALUE OF THE ASSET AND IT ONLY REFERS TO THE FULL VALUE CONSIDERATION. THE FULL VALUE CONSIDERATION CONSTITUTES A MARKET VALUE ON THE DATE OF TRANSFER. THIS ISSUE SUFFERS FROM DEBATE AND THE CIT CANNOT TRUST HIS OPINION ON THE ASSESSING OFFICER. CIT DOES NOT ASSUME JURISDICTION U/S 263 OF THE ACT ON SUCH DEBATABLE ISSUES. RELYING ON THE JUDGMENT OF THE HONBLE SUPREME COURSE IN THE CASE OF C IT VS. SHIVAKAMI CO. PVT LTD, LD COUNSEL FOR THE ASSESSEE SUBMITTED THAT THE SAID JUDGMENT IS RELEVANT FOR THE PROPOSITION THAT NO HIGHER PRICE CAN BE TAKEN AS A BASIS FOR COMPUTING THE CAPITAL GAINS UNLESS THERE IS AN EVIDENCE TO DISTRIBUTE FULL VALUE CON SIDERATION. CAPITAL GAINS CANNOT BE TAXED ON THE GROUND OF WHAT MIGHT HAVE BEEN RECEIVED OR GAINED BY THE ASSESSEE, WHICH IS IMPROPER FOR THE CIT AND THE CIT - DR TO ARGUE FOR REPLACING THE FULL VALUE CONSIDERATION WITH FAIR MARKET VALUE OF THE SHARES. 8. IN CONNECTION WITH THE ALLEGATION OF CIT / CIT - DR REGARDING ASSESSING OFFICERS FAILURE TO APPLY THE PROVISIONS OF SECTION 47(IV) OF THE ACT TO THE CASE OF THE ASSESSEE, WHO RECEIVED SHARES THROUGH CHAIN OF TRANSFERS FROM EARLIER OWNERS, LD COUNSEL FOR THE ASSESSEE SUBMITTED THAT THE ASPECT OF ACQUISITION OF SHARES WAS THE SUBJECT MATTER OF DEEP SCRUTINY BY THE AO IN THE CONTEXT OF EARNING OF LONG TERM CAPITAL LOSS OF RS. 20.27 CRS. IN THIS REGARD, LD COUNSEL FOR THE ASSESSEE BROUGHT OUR ATTENTION TO LETTE R DATED 14.3.2014. WE FIND THE SAID LETTER IS WRITTEN IN THE CONTEXT OF LOSS OF RS. 20.27 CRS GIVING THE DETAILS OF ACQUISITION OF THE SHARES AND THE SALE OF THE SHARES. THE PROVISION OF SECTIONS 47 AND 49 WAS DISCUSSED LATER AND THE AO IS IN KNOW OF THE SE PROVISIONS. THEREFORE, IT IS THE ARGUMENT OF THE LD COUNSEL FOR THE ASSESSEE THAT IN THE LIGHT OF THE DETAILS ALREADY AVAILABLE TO THE ASSESSING OFFICER AT THE RELEVANT POINT OF TIME, CIT HAS NO JURISDICTION ON THE GROUND OF NON - APPLICATION OF MIND BY THE AO. 7 9. REGARDING THE ARGUMENTS RELATING TO THE FIRM V/S SUBSTANCE, IN THE CONTEXT OF DEVIATION OF RPG GROUP OF COMPANIES BETWEEN TWO BROTHERS, LD COUNSEL FOR THE ASSESSEE SUBMITTED THAT THE DEVIATION OF BUSINESS EMPIRE BETWEEN SHRI HARSH GOENKA AND S HRI SANJEEV GOENKA WAS DONE WITH THE KNOWLEDGE OF THE HONBLE HIGH COURT AS APPROVED BY THE SAID HIGH COURT. IN SUCH CASE, THE ALLEGATION AGAINST THE AO ON THE GROUND OF HIS FAILURE TO EXAMINE THE SUBSTANCE IS NOT SUSTAINABLE. PRINCIPAL CIT HAS NOT BROUGH T OUT ANY TAX EVASION IN THIS CASE AND FURTHER HE HAS NOT BROUGHT OUT ANY REVENUE LOSS SPECIFICALLY. IN SUCH CASE, PRINCIPAL CIT CANNOT ASSUME JURISDICTION U/S 263 OF THE ACT. IN THIS REGARD, LD COUNSEL FOR THE ASSESSEE MENTIONED THAT THE WAY THE PRINCIP AL CIT TOUCHED THE ISSUES AND CONCLUDED WITHOUT QUANTIFYING THE REVENUE LOSS AMOUNTS TO HIT AND RUN CASE. IN THIS REGARD, LD COUNSEL FOR THE ASSESSEE SUBMITTED THAT THE CIT IS BOUND BY LAW TO QUANTIFY THE REVENUE LOSS IN HIS ALLEGATIONS. 10. REFERRING TO A PROVISION OF RS. 2.42 CRS IN THE CONTEXT OF SALE OF BENEFICIAL INTEREST OF RIFL BENEFIT TRUST TO M/S. OFFSHORE INDIA LTD, LD COUNSEL FOR THE ASSESSEE SUBMITTED THAT THE ASSESSEE EXPLAINED THE SAME VIDE HIS LETTER DATED 19.2.2014 DURING THE ASSESSMENT PROCEEDINGS AND THE SAID PROVISION RELATES TO THE SUNDRY DEBTORS WHICH CAPTURED THE DETAILS OF NPA. IN THIS REGARD, LD COUNSEL FOR THE ASSESSEE EXPLAINED THAT THE ASSESSEE HAD RECEIVABLES FROM M/S. OFFISHORE INDIA LTD AND THE SAID RECEIVABLES WERE ASSIGN ED TO IDEA TRACOM PVT LTD FOR RS. 24.27 CRS. RELEVANT DETAILS ARE AVAILABLE ON RECORD TO EXPLAIN THE PROVISIONS OF NPA OF RS. 2.42 CRS. 11. REGARDING THE DISCREPANCY ON THE VALUE OF SHARES QUA ENTRIES IN THE BALANCE SHEET, AS RAISED BY THE LD DR FOR THE REVENUE, LD COUNSEL FOR THE ASSESSEE BROUGHT OUR ATTENTION TO THE WRITTEN SUBMISSION AND CALCULATION OF COST OF RS. 6,07,57,222/ - WAS ARRIVED AT BASED ON THE FIFO METHOD AND NOT THE WEIGHTED AVERAGE COST BY THE ASSESSEE. IN THIS REGARD, LD COUNSEL FOR THE ASSESSEE BROUGHT OUR ATTENTION TO THE WORKING SHOWN IN THE ANNEXURE - B, WHICH WAS AVAILABLE BEFORE THE ASSESSING OFFICER AT THE RELEVANT POINT OF TIME. 12. REGARDING ALL THE MISCELLANEOUS ISSUES POINTED OUT BY THE LD CIT - DR THAT PICK THE ASSESSING OFFICE RS FAILURE TO CALL FOR VALUATION REPORT TO EXAMINE THE REVENUE IMPLICATIONS; AOS FAILURE TO CALL FOR BASIS OF REVALUATION AND DISTRIBUTION OF SHARES 8 BETWEEN HML AND STEL ETC, LD COUNSEL FOR THE ASSESSEE SUBMITTED THAT THE PROVISIONS OF SECTION 263 ARE NO T RIGHTLY INVOKED BY THE PRINCIPAL CIT. NO REVENUE LOSS IS MADE OUT. IN SUCH CASE, THE CIT CANNOT BE RIGHTLY AND VALIDLY ASSUMED JURISDICTION U/S 263 OF THE ACT. DECISION OF THE TRIBUNAL 13. WE HAVE HEARD BOTH THE PARTIES AND PERUSED THE ORDERS OF THE R EVENUE AUTHORITIES AND THE VOLUMINOUS PAPER BOOK FILED BEFORE US. WE HAVE ALSO GONE THROUGH THE WRITTEN SUBMISSIONS MADE BY BOTH THE PARTIES GIVING SUMMARY OF THEIR POINTS OF VIEW. ON EXAMINING THE VARIOUS ARGUMENTS AND COUNTER ARGUMENTS, IT IS NOTICED T HAT THE SAID ARGUMENTS CAN BE CATEGORIZED IN TWO TYPES NAMELY (I) REVENUE LOSS QUANTIFIED ISSUES AND (II) OTHERS. THE ALLEGATION OF NON - APPLICATION OF MIND BY THE AO ON BOTH THESE TYPES IS A COMMON ALLEGATION BY THE PRINCIPLE CIT AND THE LD CIT - DR. ON E XAMINING CLOSELY THE ONLY ISSUE, IE REVENUE LOSS QUANTIFIED ONE, RELATES TO THE LOSS OF RS. 20.23 CRS INDEPENDENTLY TO THE PURCHASE AND SALE OF THE SHARES. WE SHALL TAKE UP THIS ISSUE FIRST. 14. CLAIM OF LONG TERM CAPITAL LOSS OF RS. 20.23 CRS : THE STAND OF THE LD COUNSEL FOR THE ASSESSEE ON THIS ISSUE IS THAT THE AO CALLED FOR VARIOUS DETAILS, RAISED SPECIFIC QUESTIONS GOING INTO THE DETAILS OF COST OF ACQUISITION OF SHARES, APPLICABILITY OF THE PROVISIONS OF SECTIONS 47, 49 AND 56 OF THE ACT AN D COMPLETED THE REGULAR ASSESSMENT AFTER EXAMINING THE VARIOUS ASPECT OF THIS LONG TERM CAPITAL LOSS OF RS. 20.23 CRS. IN THIS REGARD, LD COUNSEL FOR THE ASSESSEE BROUGHT OUR ATTENTION TO PAGES 52, 53, 55, 57, 58, 62, 63, 65 AND 66 ETC. HE ALSO BROUGHT O UR ATTENTION TO THE WRITTEN SUBMISSION AT PAGES 68 - 76 AND 78 OF THE PAPER BOOK. THESE PAGES DEALS WITH THE EVIDENCE ABOUT THE PURCHASES, PRINCIPLE MERGER, SHAREHOLDING PATTERNS, COPIES OF INVOICES SHOWING EVIDENCE OF PURCHASE OF SHARES ETC. WRITTEN SUBMI SSION DATED 12.3.2014 PARTICULARLY DEALT WITH THE CLAIM OF LOSS REPORTED ON TRANSFER OF SHARES. THUS, LD COUNSEL FOR THE ASSESSEES ARGUMENTS REVOLVE AROUND THE DEEP SCRUTINY OF THE AO ON THIS ISSUE OF LOSS WHICH DOES NOT PERMIT THE PRINCIPAL CIT TO INVOK E THE PROVISIONS OF SECTION 263 OF THE ACT. HOWEVER, THE CASE OF THE REVENUE IS THAT THE AO HAS NOT GONE TO THE DEEP INTO THE VARIOUS ISSUES ABOUT THE AGENCIES OF THE SHARES, CLAIM OF AMALGAMATION, APPLICABILITY OF THE PROVISIONS OF SECTION 49(1) AND 47(I V) OF THE ACT ETC. AFTER CONSIDERING THE ABOVE DIVERGENT STANDS OF BOTH THE 9 PARTIES AND AFTER CONSIDERING THE VOLUMINOUS PAPER BOOKS AVAILABLE BEFORE US, WE FIND IT RELEVANT TO DISCUSS THIS ISSUE IN THE FOLLOWING PARAS. 15. TO START WITH, WE HAVE PERUSED THE ASSESSEES LETTER DATED 12.3.2014 (PAGE 68 OF THE PB) AND THE SAME REFERS TO THE ASSESSEE FOR THE AY UNDER CONSIDERATION. THIS LETTER IS WRITTEN TO THE DCIT - 6(2), CONCERNED ASSESSING OFFICER OF THE ASSESSEE. PARA 1 OF THE SAID LETTER READS AS UNDER: - THE ABOVE LETTER RUNS INTO 9 PAGES AND THE ENDING LINES ON THIS LETTER READS AS UNDER: - .....HENCE IN THE PRESENT CASE, WHILE COMPUTING THE CAPITAL GAIN OF THE IMPUGNED SHARES, THE ABOVE PROVISIONS AS WELL AS THE OBJECTS AND INTENT OF SUCH PROVISIONS AS ALSO THE SETTLED LEGAL PROVISIONS HAVE BEEN CONSIDERED AND THE LONG TERM CAPITAL LOSS HAS BEEN CALCULATED ACCORDINGLY AND OFFERED TO TAX IN THE RETURN OF INCOME. BASED ON THE ABOVE SUBMISSION, FACTS AND CIRCUMSTANCES OF OUR CLIENTS CASE THE SETTLED LEGAL PROVISIONS REFERRED TO ABOVE AND ALSO THE OBJECTS AND INTENT OF THE LEGISLATURE, YOUR GOODSELFS PROPOSAL TO EXCLUDE THE PERIOD OF HOLDING OF THE IMPUGNED SHARES FOR WHICH AMALGAMATING COMPANY HAS HELD THE SAME IS NOT JUSTIFIED AND AS SUCH OU GHT TO BE DELETED. WE HOPE THE ABOVE REPLIES TO YOUR QUERIES AND REQUEST YOU TO KINDLY TREAT THE SAME AS OUR CLIENTS COMPLIANCE TO YOUR QUERY. 16. FURTHER, WE HAVE ALSO PERUSED ANOTHER LETTER OF THE ASSESSEE ADDRESSED TO THE SAME AO VIDE ITS LETTER DATE D 14.3.2014. THIS LETTER PARTICULARLY DEALS WITH THE COST OF IMPUGNED SHARES IN THE HANDS OF THE PREVIOUS OWNER QUA THE CLAIM OF LONG TERM CAPITAL LOSS. RELEVANT PAGES 77 - 79 OF THE PAPER BOOK ARE SCANNED AND PLACED AS UNDER: - 10 11 17. THE ABOVE SCANNED DOCUMENTS CONSTITUTES WRITTEN SUBMISSIONS OF THE ASSESSEE ON THIS PARTICULAR ISSUE OF CLAIM OF LONG TERM CAPITAL LOSS OF RS. 20. 23 CRS AND THE SUBMISSIONS IN PARA 2 OF PAGE 78 ABOVE ARE DIRECTLY ON THE ISSUE OF COST OF ACQUISITION OF SHA RES. PARA C OF PAGE 79 IS DIRECTLY ON THE SALE PRICE QUA THE SUBSTITUTING THE FAIR MARKET VALUE TO THE FULL VALUE OF THE CONSIDERATION. IT IS RELEVANT TO MENTION HERE THE CASE OF THE CIT. THE REVISION ORDER DEALS WITH THE DOCUMENTS RELATING TO THE REQ UIREMENT OF CONSIDERING THE FAIR MARKET VALUE OF THE SHARES IN PLACE OF FULL VALUE OF THE CONSIDERATION OF THE SHARES. FURTHER, WE HAVE GONE THROUGH THE ORDER OF THE TRIBUNAL IN CASE OF RUPEE FINANCE & MANAGEMENT (P) LTD (SUPRA), WHICH IS RELEVANT FOR THE PROPOSITION THAT THE FAIR MARKET VALUE OF THE ASSET CANNOT SUBSTITUTE WITH THE FULL VALUE OF THE CONSIDERATION, THE EXPRESSION USED IN SECTION 48 OF THE ACT. IT IS THE RESPONSIBILITY OF THE AO TO BRING ON RECORD ANY INCRIMINATING MATERIAL TO SUPPORT THE VIEW THAT FAIR MARKET VALUE IS THE FULL VALUE OF THE CONSIDERATION OF THE TRANSFERRED ASSET. IN THE CASE OF BARGAIN TRANSACTIONS AND IN THE ABSENCE OF ANY SUCH MATERIAL, THE ADDITION MADE BY THE AO BY RELYING ON THE FAIR MARKET VALUE IS UNSUSTAINABLE IN L AW. THUS, IN OUR VIEW, THE AO EXAMINED THIS ISSUE OF CLAIM OF LOSS OF RS. 20.23 CRS IN THE REGULAR ASSESSMENT PROCEEDINGS MADE U/S 143(3) OF THE ACT. FURTHER, WE HAVE NO CONFUSION IN OUR MIND TO MENTION HERE THAT AO HAS GONE THROUGH THE SPECIFIC ISSUES R ELATING TO THE COST OF ACQUISITION OF SHARES OF CESC; SAREGAMA AND PHILIPS CARBON BLACK LTD. THE DOCUMENTS CITED ABOVE WOULD CONTAIN THE INVOICE OF THE PURCHASE AND SALE TRANSACTIONS CONFIRM OUR DECISION. IN ANY CASE, THE FAIR MARKET VALUE RELATED ADDITI ONS ARE UNSUSTAINABLE IN LAW. CIT CANNOT RECOMMEND SUCH UNSUSTAINABLE ADDITIONS AS THE CASE OF REVENUE LOSS WHILE REVISING THE ORDER OF THE AO. CIT CAN ASSUME JURISDICTION ONLY WHEN THE AO ASSUMED THE LAW ERRONEOUSLY IE INCORRECT ASSUMPTION OF LAW. CIT HAS NOT MADE OUT ANY SUCH 12 ERRONEOUS ASSUMPTION OF LAW IN THIS CASE EITHER IN MATTERS OF COST OF ACQUISITION OR IN MATTERS OF SALE TRANSACTIONS. WE ALSO DISMISS THE CIT / CIT - DRS VEHEMENT ARGUMENT THAT AO FAILED TO APPLY HIS MIND AND AO FAILED TO CONDUCT MEANINGFUL INQUIRIES INTO THESE ASPECTS. THERE IS AN EVIDENCE FOR RAISING THIS ISSUE IN THE REGULAR ASSESSMENT PROCEEDINGS, THERE IS A VOLUME OF LETTERS BETWEEN THE AO AND THE ASSESSEE ON THIS ISSUE AND THE ABOVE EXTRACTS ARE HEAVILY RELIED. THEREFORE, I N OUR OPINION, IT IS NOT A CASE OF NON - APPLICATION OF MIND BY THE AO TO THE VARIOUS ASPECTS OF THIS ISSUE OF LOSS OF RS. 20.23 CRS. THUS, WE DISMISSED ALL THE RELATED ARGUMENTS OF THE CIT / CIT - DR. 18. PREMIUM OF RS. 715/ - PER SHARE I F AO FAILED TO MAKE A ANY INQUIRY: - THIS IS THE CASE OF THE ASSESSEE ON THIS ISSUE, RAISED BY THE REVENUE, IS THAT THE AO RAISED THIS ISSUE DURING THE REGULAR ASSESSMENT PROCEEDINGS AND CALL FOR VARIOUS DETAILS BEFORE COMPLETING THE ASSESSMENT WITHOUT MAKING ANY ADDITIONS. BA CKGROUND DETAILS ARE ALREADY DISCUSSED IN THE ABOVE PARAS OF THIS ORDER. IN BRIEF, THE ASSESSEE ISSUED EQUITY SHARES ON RIGHTS BASIS TO SSL TO SETTLE ITS OUTSTANDING PAYABLES. THESE PAYABLES INCLUDE PAYER ON ACCOUNT OF PURCHASE OF EQUITY SHARES WORTH RS. 20.27 CRS IN THE YEAR UNDER CONSIDERATION AND OUTSTANDING PAYABLES ON ACCOUNT OF PURCHASE OF BENEFICIAL INTEREST IN RIFL BENEFIT TRUST AMOUNT TO RS. 45.31 CRS IN THE IMMEDIATELY PRECEDING ASSESSMENT YEAR. THE RIGHTS WERE ISSUED WITH THE PREMIUM OF RS. 71 5/ - PER SHARE WITH A FACE VALUE OF RS. 10/ - . IT IS THE ARGUMENT OF THE CIT - DR THAT THE AO DID NOT MAKE ANY INQUIRY INTO THE REASONABLENESS OF THE SAID PREMIUM. ON THIS ISSUE LD COUNSEL FOR THE ASSESSEE BROUGHT OUR ATTENTION TO THE QUESTIONNAIRE ISSUED BY THE AO DATED 6.2.2014 AND VARIOUS WRITTEN SUBMISSIONS CITED ABOVE (SUPRA) IE 19.2.2014; 14.3.2014; 12.3.2014 AND BROUGHT OUR ATTENTION TO THE SPECIFIC QUESTIONS ON THE ISSUE OF RESERVE. QUESTION NOS. 9 AND 10 ARE RELEVANT IN THIS REGARD. HE BROUGHT OUR ATTENTION TO ANNEXURE - 3 PALCED AT PAGE 33 OF THE PB AND SUBMITTED THAT THE ASSESSEE INFORMED THE AO ABOUT THE FACT OF COLLECTING OF PREMIUM @ RS. 715/ - PER SHARE. THE DETAILS GIVEN IN TABLE (9 TH COLUMN IS RELEVANT) GIVEN ON THE SAID PAGE 33 OF THE PB. F ROM COLUMN 10, THE FOLLOWING WAS READ OUT: - RECEIVABLE FROM INSTANT ON ACCOUNT OF TRANSFER OF EQUITY SHARES AND BENEFICIAL INTEREST IN RIFL BENEFICIAL TRUST. 13 19. THE SAID TABLE AT PAGE 33 WAS GIVEN IN THE CONTEXT OF FURNISHING OF INCREASING THE SHARE C APITAL INVOLVING THE ASSESSEE AND THE SSL. FURTHER, THE STAND OF THE LD COUNSEL FOR THE ASSESSEE IS THAT THE SAID PREMIUM IS TO THE BENEFIT OF THE ASSESSEE AND THERE IS NO LOSS OF REVENUE TO THE ASSESSEE UNDER CONSIDERATION IN RESPECT OF WHOM PROVISIONS O F SECTION 263 ARE INVOKED. LD COUNSEL FOR THE ASSESSEE ALSO SUBMITTED THAT THE SHARE PREMIUM CALCULATED BY THE ASSESSEE CONSTITUTES A CAPITAL RECEIPT AT THE RELEVANT POINT OF TIME AND THE AMENDED PROVISION OF SECTION 56(2)(VII)(B) OF THE ACT BY THE FINA NCE ACT, 2012 IS OPERATION W.E.F 1.4.2013 IE FROM AY 2013 - 14 ONLY. 20. PER CONTRA, THE CASE OF THE LD CIT - DR IS THAT THE AO FAILED TO MAKE ANY INQUIRY INTO THE REASONABLENESS OF THE PREMIUM. 21. ON HEARING BOTH THE PARTIES ON THE APPLICATION OF MIND BY THE AO INTO THE REASONABLENESS OF THE PREMIUM, WE FIND NEE TO EXTRACTING CERTAIN RELEVANT FACTS TO THIS ORDER AND THEY ARE AS UNDER: - 22. QUESTION NOS.9 AND 10 OF THE QUESTIONNAIRE DATED 6.2.2014 ISSUED BY THE AO TO THE ASSESSEE ARE AS UNDER: - 23. THE REPLIES OF THE ASSESSEE TO THE SAID QUESTIONS ARE PLACED IN PAGE 10 OF THE PAPER BOOK VIDE ITS LETTER DATED 19.2.2014 AND THE RELEVANT ANSWERS ARE AS FOLLOWS: - 14 24. FURTHER, WE EXAMINED PAGE 33 OF THE PAPER BOOK AND THE SAME IS SCANNED AND PLACED AS UNDER: - 15 25. THE ABOVE FACTS REVEAL THE ISSUE OF SHARE PREMIUM WAS THE SUBJECT MATTER OF SCRUTINY BY THE AO IN THE REGULAR ASSESSMENT PROCEEDINGS. AO IS ALSO AWARE OF THE UNDISPUTED FACT OF THE ASSESSEE CALCULATING PREMIUM AT RS. 715/ - PER SHARE FROM SS L. IT IS NOT CLEAR FROM THE RECORD WHAT IS THE REVENUE LOSS ON THIS ISSUE FROM THE CITS POINT OF VIEW? IF THE PREMIUM IS EXCESSIVE FROM THE DEPARTMENTS POINT OF VIEW, IT IS THE GAIN F THE ASSESSEE. IN OUR OPINION, THERE IS NO REVENUE LOSS ON THIS ISSUE TO THE ASSESSEE. FURTHER, IT IS OBVIOUS THAT CAPITAL LOSS CANNOT BE THE GROUND FOR THE CIT TO ASSUME JURISDICTION U/S 263 OF THE ACT. THE CAPITAL RECEIPT ON THIS KIND IS TAX NEUTRAL SO FOR AS THIS ASSESSEE IS CONCERNED. AMENDED PROVISIONS OF SECTION 56 (2)(VII)(B) OF THE ACT DO NOT APPLY TO THE AY 2011 - 12 UNDER CONSIDERATION. THUS, ASSESSMENT ORDER CANNOT BE INVALID ON THE GROUND OF ERRONEOUS ASSUMPTION OF LAW OR FACT. WHAT WOULD AO DO EVEN IF HE PROBE THIS ISSUE FURTHER, WHEN THERE IS NO REVENUE IMPLI CATIONS LEGALLY? THEREFORE, AS ARGUED BY THE LD COUNSEL FOR THE ASSESSEE, THIS ISSUE OF PREMIUM FALLS IN THE CAPITAL FIELD WITH NO REVENUE IMPLICATION ON THE INCOME ASSESSED BY THE AO. ON THESE FACTS, WE ARE OF THE OPINION THAT THE ARGUMENTS OF THE CIT / CIT - DR IS MISPLACED QUA THE PROVISIONS OF SECTION 263 OF THE ACT. DECISION ON THE RELEVANCE OF EXPLANATION - 2 TO SECTION 263(1) OF THE ACT 26. REFERRING TO THE AMENDMENT TO CLAUSE (C) TO SECTION 263(1) OF THE ACT, LD AR MENTIONED THE PROVISIONS OF SECTION 263 OF THE ACT WERE AMENDED BY THE FINANCE ACT, 2015 W.E.F. 1.6.2015 WHEREBY EXPLANATION - 2 TO SECTION 263(1) WAS INSERTED. THE PRINCIPAL CIT C AN VALIDLY ASSUME JURISDICTION UNDER THIS SECTION IF AO PASS AN ORDER EITHER WITHOUT MAKING INQUIRIES OR VERIFICATION WHICH SHOULD HAVE BEEN DONE OR ALLOWING ANY RELIEF WITHOUT INQUIRE INTO THE CLAIM OR NOT IN ACCORDANCE WITH ANY ORDER / DIRECTION / INSTRU CTION ISSUED U/S 119 ETC. THE CASE OF THE LD DR BEFORE US IS THAT THE SAID AMENDMENT IS CLARIFICATORY IN NATURE AND SHOULD BE APPLIED TO THE ORDERS REVISED U/S 263 OF THE ACT. IN SUPPORT, LD DR RELIED ON THE REFERENCE MADE IN THE DECISIONS OF THE TRIBUNA L IN THE CASE OF CROMPTON GREAVES LTD (SUPRA). PER CONTRA, LD COUNSEL FOR THE ASSESSEES ARGUMENT IS THAT THE SAID AMENDMENT IS PROSPECTIVE IN NATURE AND IT SHOULD BE APPLIED TO THE ORDERS REVISED PRIOR TO THE AMENDMENT. REGARDING THE DECISION OF THE TRI BUNAL IN THE CASE OF CROMPTON GREAVES LTD (SUPRA), LD COUNSEL FOR THE ASSESSEE SUBMITTED THAT THE SAID DECISION WAS PASSED WITHOUT 16 CONSIDERING THE ORDER OF THE TRIBUNAL IN THE CASE OF M/S. A.V. INDUSTRIES VS. ACIT IN ITA NO. 3469/M/2010 (AY 2005 - 06), DATED 6.11.2015. HE BROUGHT OUR ATTENTION TO THE CONTENTS OF PARA 11 OF THE SAID TRIBUNALS ORDER (SUPRA), WHEREIN THE TRIBUNAL GAVE A CATEGORICAL FINDING THAT THE DEEMED PROVISIONS OF EXPLANATION - 2 TO SECTION 263(1) ARE NOT APPLICABLE FOR THE AY UNDER CONSIDE RATION. IT IS OBVIOUS THAT THIS PARTICULAR DECISION OF THE COORDINATE BENCH DECISION OF THE TRIBUNAL WAS NOT CONSIDERED IN THE DECISION OF THE TRIBUNAL IN THE CASE OF CROMPTON GREAVES LTD (SUPRA). IT IS ALSO THE LD COUNSELS ARGUMENT THAT THE DECISION OF THE TRIBUNAL IN THE CASE OF CROMPTON GREAVES LTD (SUPRA) DID NOT DEAL WITH THE ISSUE IE WHETHER THE SAID AMENDMENT IS IN RETROSPECTIVE OR PROSPECTIVE IN NATURE. LD COUNSEL FOR THE ASSESSEE ALSO MENTIONED THAT A FAVOURABLE DECISION SHOULD BE CONSIDERED WH EN CONTRARY / DIVERGENT DECISIONS EXIST ON THE ISSUE. 27 . ON CONSIDERING THE ARGUMENTS OF BOTH THE PARTIES AS WELL AS THE CITED DECISIONS ON THIS ISSUE, WE FIND THE SAME IS RELEVANT ONLY IF THE AO PASSED AN ORDER WITHOUT MAKING INQUIRIES OR VERIFICATION W HICH SHOULD HAVE BEEN MADE. IN OUR VIEW, THE ADJUDICATION OF THESE ARGUMENTS BECOMES IRRELEVANT IF THE ORDERS ARE PASSED BY A O A F T E R MAKING INQUIRIES / VERIFICATION, WHICH SHOULD HAVE BEEN MADE. FURTHER, THE ARGUMENTS ON RETROSPECTIVITY OF AMENDMENT BECOMES AN AC ADEMIC EXERCISE ONLY. 28. THEREFORE, WE ARE OF THE OPINION, THE AO CONDUCTED REASONABLE INQUIRIES INTO THE BASIC FACTS MATERIAL TO THE MAKING OF THE ASSESSMENT. IT IS OBVIOUSLY NOT THE CASE OF LACK OF INQUIRIES BY THE AO DURING THE ASSESSMENT. THE DOCU MENTATION CITED ABOVE IN THIS ORDER SUGGEST THE ABOVE FINDING. WE CANNOT UNDERSTAND WHY THE AO SHOULD TRAVEL INTO ZONE OF PURCHASE PRICE OF THE SHARES OF CFC, SAREGAMA RPG - CITHL AS THEY WERE ACQUIRED IN THE PAST. ANY ADDITION ON THE ACCOUNT OF PURCHASE PRICE IN THIS YEAR IS UNSUSTAINABLE IN LAW. IT IS A SETTLED LEGAL PRINCIPLE. ANY ADDITION RELATING TO INVESTMENT SHOULD BE MADE IN THE YEAR OF INVESTMENT. REGARDING SALE PRICE ALSO, THE SAME ARE COMPETITIVE QUA THE PRICES QUOTED IN BSE AND THE FINANCIA LS, AS THE CASE MAY BE. NO ADVERSE DATA IS PLACED BY THE CIT ON RECORDS. CIT ALSO FAILED TO DEMONSTRATE THE LOSS OF REVENUE AS REQUIRED WHEN HE ASSUMES JURISDICTION U/S 263 OF THE ACT. WE ALSO NOTICED THAT BOTH THE PRINCIPAL CIT AND CIT - DR HAVE NOT LI STED / ELABORATED THE MEANING OF THE EXPRESSION ALL ASPECTS USED BY THEM WHILE 17 COMMENTING ON THE AOS FAILURE TO CARRYOUT INQUIRIES. THUS, IT IS THE CASE OF AO CONDUCTING THE INQUIRIES DURING THE REGULAR ASSESSMENT PROCEEDINGS, FORMING AN OPINION IN THE MATTER WITH DUE APPLICATION OF HIS MIND AND NOT MAKING ANY ADDITION AFTER DUE INQUIRIES. WITH SO MUCH OF EVIDENCE ON RECORDS IN SUPPORT OF THE ABOVE, WE CANNOT HOLD AO FAILED TO MAKE MEANINGFUL INQUIRIES. THUS, WE DISMISS THE ARGUMENTS OF LD DR AND AL LOW THE VIEWS OF THE LD COUNSEL FOR THE ASSESSEE. ACCORDINGLY, WE HOLD, PRINCIPAL CIT ERRONEOUSLY ASSUMED JURISDICTION ON THIS ISSUE TOO. 29. BEFORE PARTING ON THE ISSUE OF APPLICATION OF MIND, WE WOULD LIKE TO MENTION THAT THAT, WHILE DESCRIBING THE OR DER OF THE AO IN MATTERS OF JURISDICTION OF CIT U/S 263, THE DEPARTMENT USED THE FOLLOWING EXPRESSIONS. THEY ARE; (I) LACK OF INQUIRY ; (II) INADEQUATE INQUIRY ; (III) IMPROPER INQUIRY AND (IV) PERFUNCTORY INQUIRY 35. REGARDING LACK OF INQUIRY, WE ARE OF THE OPINION THAT THE SAME IS RELEVANT TO CASE OF NO INQUIRY AT ALL BY AO IN THE REGULAR ASSESSMENT. NO QUESTIONS RAISED ON THE MATTER DISCUSSED BY THE CIT IN REVISION PROCEEDINGS. THE SAME SHOULD NOT BE USED IN CASES OF SOME OR FULL INQUIRIES INTO SUCH MATTER. REGARDI NG INADEQUATE INQUIRY, WE ARE OF THE OPINION THAT THE EXPRESSION INADEQUACY IS NOT DEFINED AND IT IS A MATTER OF SUBJECTIVE AND RELATIVE ITEM. WHAT IS THE DECIDING ITEM BETWEEN THE ADEQUACY AND INADEQUACY, SIMILAR IS THE EXPRESSION OF IMPROPER IN QUIRY. WHAT IS THE DECIDING LIVE BETWEEN PROPER AND IMPROPER INQUIRIES? THESE EXPRESSIONS NEED TO BE UNDERSTOOD FROM THE POINT OF VIEW OF AO ACCEPTING ERRONEOUS CLAIMS OF ERRONEOUS ASSUMPTION OF LAW (FAILURE TO FOLLOW LAW / PRECEDENTS ON THE MATTER) OR F ACT AFTER GATHERING THEM. FINALLY, ON THE ISSUE OF PERFUNCTORY INQUIRY ALSO, WE FIND THIS EXPRESSION MEANS AN ACTION TO CARRY OUT WITHOUT REAL INTEREST / FEELING / EFFORT, CURSORY, DESULTORY, ROUTINE DUTY, HASTY, SUPERFICIAL, DONE QUICKLY ETC. THE CA SES OF THE PERFUNCTORY INQUIRY SHOULD ALSO BE ANALYSED BY THE CIT DURING THE PROCEEDINGS U/S 263, THE AOS DIFFICULTIES, RESTRICTIONS, WORK LOAD ASPECTS, ORIGINAL INTENTIONS OF AO ETC. PRINCIPAL CIT NEEDS TO ACT PRACTICAL IN THESE MATTERS. IN ASSESSMEN T, AO ACCEPTS VARIOUS CLAIMS OF THE ASSESSEE MADE IN THE RETURNS AFTER SCRUTINIZING OR 18 AUDITING THE ACCOUNTS OF THE ASSESSEE AND MADE FEW ADDITIONS / DISALLOWED FEW CLAIMS. NOT ALL SUCH ACCEPTANCES FALL IN THE CATEGORY OF INADEQUATE INQUIRY OR IMPROPER I NQUIRY OR PERFUNCTORY INQUIRY. THEREFORE, PRINCIPAL CIT CANNOT RESORT TO HIT AND RUN APPROACH. HE IS UNDER LEGAL OBLIGATION TO ENLIST THE DETAILS OF INQUIRIES NOT DONE BY THE AO, THE MANNER OF CONDUCTING SUCH INQUIRIES ETC AND QUANTIFY OR DEMONSTRATE THE REVENUE IN CLEARLY EXPRESSED LANGUAGE IN HIS ORDER. THEREFORE, ON THE FACTS OF THE PRESENT CASE AND THE SETTLED LEGAL PROPOSITIONS IN FORCE, WE ARE OF THE OPINION THAT THE PRINCIPAL CIT WRONGLY ASSUMED JURISDICTION U/S 263 OF THE ACT ON ALL THESE ISSUE S RAISED BY HIM. CONSIDERING THE INQUIRIES DONE BY THE AO CLEARLY MADE OUT IN THE RECORDS ABOVE, WE ARE OF THE OPINION THAT THIS IS NOT THE CASE OF INADEQUATE INQUIRY OR IMPROPER INQUIRY OR PERFUNCTORY INQUIRY . THEREFORE, WE RESTORE THE ORDER OF THE AO ORIGINALLY PASSED ON 19.3.2014. ACCORDINGLY, GROUND NOS.1 TO 3 RAISED BY THE ASSESSEE ARE ALLOWED. 30 . IN THE RESULT, APPEAL OF THE ASSESSEE IS ALLOWED. ORDER PRONO UNCED IN THE OPEN COURT ON 2 0 T H A P R I L , 2016. S D / - S D / - ( SANDEEP GOSAIN ) (D. KARUNAKARA RAO) JUDICIAL MEMBER ACCOUNTANT MEMBER MUMBAI ; 2 0 . 4 .2016 . . ./ OKK , SR. PS / COPY OF THE ORDER FORWARDED TO : 1. / THE APPELLANT 2. / THE RESPONDENT. 3. ( ) / THE CIT(A) - 4. / CIT 5. , , / DR, ITAT, MUMBAI 6. / GUARD FILE . //TRUE COPY// 19 / BY ORDER, / (DY./ASSTT. REGISTRAR) , / ITAT, MUMBAI