Soma Infrastructure Private Limited , Hyderabad V. Dy. Commissioner of Income Tax , Circle-3(2), Hyderabad

ITA 894/Hyd/2019

• Counselvise Citation: [2021] 107 COUNSELVISE.COM (IT) 2313 (ITAT-HYDERABAD)
• Duration Of Justice: 2 year(s) 4 month(s) 28 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 25-10-2021
• Appeal Filed By: Assessee
• Order Result: Dismissed
• Bench Allotted: DB-A
• Assessment Year: 2014-2015
• Appeal Filed On: 27-05-2019
• Result in Favour of: Revenue
• Court: TRIBUNAL
• Department Lawyers: ASHOK KARDAM
• Keywords: Fair market value
• Section: 143(3); 115JB; 201; 143(2); 263

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL HYDERABAD A BENCH, HYDERABAD. BEFORE SHRI A. MOHAN ALANKAMONY, ACCOUNTANT MEMBER AND SHRI S.S. GODARA, JUDICIAL MEMBER (T HROUGH V IDEO CONFERENCE ) ITA NO. 894 /HYD/201 9 (ASSESSMENT YEAR : 201 4 - 15 ) M/S. SOMA INFRASTRUCTURE PVT. LTD., HYDERABAD. PAN AAMVD0598Q VS. DY. COMMISSIONER OF INCOME TAX, CIRCLE 3(2), HYDERABAD. APPELLANT RESPONDENT APPELLANT BY : SHRI MOHD. AFZAL. RESPONDENT BY : SHRI ASHOK KARDAM (D.R.) DATE OF HEARING : 29.09 .2021. DATE OF PRONOUNCEMENT : 25 .10 .2021. O R D E R PER SHRI S.S. GODARA, J.M. : THIS ASSESSEES APPEAL FOR ASST. YEAR 2014 - 15 ARISES FROM THE P RINCIPAL COMMISSIONER OF INCOME TAX - 3 , HYDERABAD S ORDER DT. 25.03.2019 PASSED IN CASE NO. PR.CIT - 3/HYD/263/2018 - 19 , INVOLVING REVISION PROCEEDINGS UNDER SECTION 263 OF THE INCOME TAX ACT, 1961 (THE ACT). HEARD BOTH THE PARTIES . C ASE FILE PERUSED. 2 ITA NO. 894/HYD/2019 2. RELEVANT FACTS PERTAINING TO INSTANT SOLITARY ISSUE OF COR RECTNESS OF THE LEARNED PCIT S REVISION DIRECTION S HEREIN ARE IN A VERY NARROW COMPASS. THE ASSESSING OFFICER HAD FRAMED HIS 143(3) REGULAR ASSESSMENT DT.13.12.2016 DETERMINING ASSESSEE'S LOSS AT RS.7,10,18,241 AS PER NORMAL PROVISIONS WITH BOOK LOSS OF R S.7,39,10,491 UNDER SECTION 115JB OF THE ACT. THE PCIT THEREAFTER SOUGHT TO INVOKE HIS 263 REVISION JURISDICTION BY ISSUING SHOW CAUSE NOTICE FOR THE FOLLOWING TWIN REASON S : I) IT IS OBSERVED FROM THE PROFIT AND LOSS ACCOUNT FO THE YEAR ENDED MARCH 31, 2014 THAT A SUM OF RS/23,78,84,733 WAS DEBITED TOWARDS FINANCE COST OUT OF WHICH A SUM OF RS.16,76,39,443 WAS DISALLOWED BY THE ASSESSING OFFICER IN THE SCRUTINY ASSESSMENT ORDER. HOWEVER, THE ASSESSEE HAS SHOWN LONG TERM BORROWINGS OF RS.426,50,23,0 81 AS ON 31 ST MARCH 2014 AND INTEREST THEREON OF RS.23,78,84,733 WAS DEBITED IN THE PROFIT AND LOSS ACCOUNT AS INTEREST ON BORROWED FUNDS. OUT OF THE LONG TERM BORROWINGS, A SUM OF RS .400,90,96,000 WAS INVESTED IN EQUITY SHARES OF COMPANIES AND RS.295,99,71,988 WAS UTILIZED TOWARDS SHORT TERM LOANS AND ADVANCES TO RELATED PARTIES ON WHICH NO INTEREST WAS CHARGED. HENCE, THE ENTIRE EXPENDITURE OF RS.23,78,84,733 DEBITED TOWARDS INTERES T ON BORROWINGS SHALL BE DISALLOWED. THIS ASPECT WAS NOT EXAMINED BY THE ASSESSING OFFICER DURING THE COURSE OF SCRUTINY PROCEEDINGS. 3 ITA NO. 894/HYD/2019 II) FURTHER IT IS OBSERVED THAT THE ASSESSEE RECEIVED A SUM OF RS.52,20,00,00 0 TOWARDS SHARES ISSUED AT A PREMIUM OF RS .900 PER SHARE. BUT, NO VALUATION CERTIFICATE WAS FURNISHED ALONG WITH THE RETURN OF INCOME. AS PER THE CALCULATION, AN AMOUNT OF RS.2,93,01,681 IS REQUIRED TO BE OFFERED UNDER INCOME FROM OTHER SOURCES. THE PCIT THEREAFTER DECLINED THE ASSESSEE'S DETA ILED EXPLANATION AS UNDER : -- SPACE LEFT INTENTIONALLY -- 4 ITA NO. 894/HYD/2019 5 ITA NO. 894/HYD/2019 THE FAIR MARKET VALUE OF UNQUOTED EQUITY SHARE = RS.869.91 3. MR. AFZAL VEHEMENTLY CONTENDED DURING THE COURSE OF HEARING THAT THE ASSESSING OFFICER HA D RIGHTLY FRAMED HIS REGULAR ASSESSMENT ACCEPTING ASSESSEE'S INTEREST ON BORROWING S OF RS.23,78,84,733 AS WELL AS SHARE APPLICATION/PREMIUM AMOUNT OF RS.52,20,00,000 @ RS.900 UNIT DURING SCRUTINY AFTER MAKING ALL THE 6 ITA NO. 894/HYD/2019 CORRESPONDING ENQUIRY (IES) AND THEREFORE , THE PCIT HEREIN HAS ERRED IN LAW AND ON FACTS IN INVO K ING HIS SECTION 263 REVISION JURISDICTION . WE FIND NO MERIT IN THE ASSESSEE'S INSTANT TWIN ARGUMENT S SINCE IT HAS NOT EVEN PLACED THE ASSESSING OFFICERS ALLEGED DETAILED QUESTIONNAIRE EXAMINING THE FOREGOING ISSUE (S) U/S.142(1) OR SECTION 143(2) OF THE ACT; AS THE CASE MAY BE DURING SCRUTINY . WE THUS EXPRESS OUR AGREEMENT WITH THE LEARNED PCITS IMPUGNED REVISION DIRECTION S SPECIFICALLY PINPOINTING THE ASSESSING OFFICERS FAILURE IN ENQUIRING THE SE TWIN ISSUES . WE QUOTE HON'BLE APEX COURTS LANDMARK DECISION IN MALABAR INDUSTRIAL CO. LTD. VS. CIT 243 ITR 83 (SC) THAT AN ASSESSMENT HAS TO BE BOTH ERRONEOUS AS WELL AS CAUSING PREJUDICE TO THE INTEREST OF REVENUE; SIMULTANEOUSLY SO AS TO ATTRACT APPLICAB ILITY OF SECTION 263 MECHANISM. WE THEREFORE HOLD THAT LACK OF ENQUIRY OR PROPER ENQUIRY, IN LIGHT OF EXPL A NATION (2) INSERTED IN 263 VIDE FINANCE ACT, 2015 W.E.F. 1.6.2015 , RENDERS A N ASSESSMENT BOTH ERRONEOUS AS WELL AS CAUSING PREJUDICE TO INTEREST OF THE REVENUE 7 ITA NO. 894/HYD/2019 AND THUS, THE PCIT HAS RIGHTLY EXERCISED HIS REVISION JURISDICTION U/S. 263 OF THE ACT. THE ASSESSEE'S ALL SUBSTANTIVE GROUNDS RAISING ITS AVERMENTS TO THIS EFFECT STAND REJECTED ACCORDINGLY. 4. THIS ASSESSEE'S APPEAL IS DISMISSED. ORDER PRONOUNCED IN THE OPEN COURT ON 25TH OCTOBER, 2021. SD/ - SD/ - (A.MOHAN ALANKAMONY ) (S.S. GODARA) ACCOUNTANT MEMBER JUDICIAL MEMBER HYDERABAD, DT. 25 .10 .2021. * REDDY GP COPY TO : 1. M/S. SOMA INFRASTRUCTURE PVT. LTD., 14, AVENUE NO.4, BANJARA HILLS, HYDERABAD - 500 034 2. DCIT, CIRCLE 3(2), HYDERABAD. 3. PR. C I T - 3 , HYDERABAD. 4. ADDL. CIT , RANGE - 3, HYDERABAD. 5. DR, ITAT, HYDERABAD. 6. GUARD FILE. BY ORDER SR. PVT. SECRETARY, ITAT, HYDERABAD.