IN THE INCOME TAX APPELLATE TRIBUNAL
DELHI BENCHES “F” : DELHI

[THROUGH VIDEO CONFERENCING]

BEFORE SHRI R.K. PANDA, ACCOUNTANT MEMBER
AND

SHRI AMIT SHUKLA, JUDICIAL MEMBER

ITA.No.534/Del./2021
Assessment Year 2015-2016

Pawansut Media Services The Principal
Pvt. Ltd., Delhi – 110019. Commissioner of Income
PAN AAECP2155J
C/o. Shri Kapil Goel, vs. Tax-7, C.R. Building,
Advocate, F-26/124,
Sector-7, Rohini, ITO, I.P. Estate,
Delhi – 110 085. New Delhi - 110 002.

(Appellant) (Respondent)

For Assessee : Shri Kapil Goel, Advocate &

Shri Sandeep Goel, Advocate

For Revenue : Smt. Sushma Singh, CIT-DR

Date of Hearing : 19.07.2021
Date of Pronouncement : 14.10.2021

ORDER

PER R.K. PANDA, A.M.

This appeal filed by the Assessee is directed
against the order dated 30.03.2021 of the Ld. PCIT-7, Delhi,
passed under section 263 of the I.T. Act, 1961, relating to
the A.Y. 2015-2016.
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ITA.No.534/Del./2021 Pawansut
Media Services Pvt. Ltd., Delhi.

2. Facts of the case, in brief are that the assessee is

a company and is stated to have not done any business

activity during the year. It filed its return of income on

29.10.2015 declaring loss of Rs.30,439/-. The A.O.

completed the assessment on 15.12.2017 under section

143(3) of the I.T. Act, 1961, accepting the returned loss of

Rs.30,439/-.

2.1. Subsequently, the Ld. PCIT examined the records

and noted that the case was selected for limited scrutiny on

the following reasons :

i) Low income in comparison to very high
investments.

ii) Large increase in investment in unlisted equities
during the year.

iii) Low income in comparison to high loans/
advances/investment in shares.

2.2. He noted that during the year under consideration

the assessee has invested in equity shares of the following
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Media Services Pvt. Ltd., Delhi.

companies which is hit by the provisions of Section

56(2)(viia) of the Income Tax Act, 1961 :

2.3. However, the A.O. during the course of

assessment proceedings has not examined the issue of

applicability of provisions of Section 56(2)(viia) of I.T. Act for

basis of determination of Fair Market Value [“FMV"].

Similarly, the other reason for scrutiny was investment in

unlisted equity shares during the year. However, although

the A.O. has examined with regard to source of investment
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Media Services Pvt. Ltd., Delhi.

and income derived from this investment, however, the A.O.
has not examined the fair market value of investment. He,
therefore, was of the opinion that the order passed by the
A.O. on 15.12.2017 under section 143(3) of the I.T. Act,
1961 appears to be erroneous in so far as it is prejudicial to
the interests of revenue. He, therefore, issued a show cause
notice to the assessee to explain as to why the order passed
by the A.O. should not be set aside.

2.4. It was submitted by the assessee that the A.O.

after considering the various written submissions filed by

the assessee from time to time has completed the

assessment. Relying on various decisions, it was submitted

that the order of the A.O. is neither erroneous nor

prejudicial to the interest of Revenue as the parameters laid

down by the Hon’ble Supreme Court have never been

crossed and no loss to the Revenue has ever caused due to

the same. It was also submitted that the provisions of

Section 56(2)(viia) of the I.T. Act, 1961 is grossly inapplicable

to the transactions subjected for revisional powers under

section 263 of the I.T. Act, 1961. The A.O. had already
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ITA.No.534/Del./2021 Pawansut
Media Services Pvt. Ltd., Delhi.

examined the valuation provided by the assessee company

during the course of on-going proceedings to his

satisfaction. It was argued that the proceedings initiated

under section 263 of the I.T. Act, 1961 should be dropped.

2.5. However, the Ld. PCIT was not satisfied with the

arguments advanced by the assessee. After going through

the assessment order and the assessment records, he noted

that the aspect of valuation of Shares/Fair Market Value as

required for the purposes of Section 56(2)(viia), which is

intrinsically connected with the issue of investment in

unquoted equity shares has not been enquired into at all.

Therefore, the judicial precedents cited in support of its

claim by the assessee and the A.O. do not apply to the facts

of the present case, since there is a lack of enquiry on the

aspect of valuation of the shares in terms of Section

56(2)(viia) read with Rules 11U/11UA of the Income Tax

Rules. Therefore, the PCIT observed that the assessment

order is erroneous as well as prejudicial to the interests of

Revenue to this extent. He further noted that ideally the

Assessment Order should be a self-contained speaking order
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Media Services Pvt. Ltd., Delhi.

explaining the reasons of acceptance or rejection of the
contention of assessee, summarising the enquiries
conducted and the findings therein. However, from perusal
of the Assessment Order dated 15.12.2017, it is seen that all
such required elements are missing therein and it is not
reflected if any enquiry relevant to the issue under
consideration in the present proceedings has been
conducted. The Ld. PCIT relying on various decisions held
that since there was no enquires conducted by the A.O. on
the issue of valuation of shares in terms of Section 56(2)(viia)
read with Rules 11U/11UA of the Income Tax Rules the
order passed by the A.O. without making any enquiry or
verification which should have been done has made the
order erroneous in so far as it is prejudicial to the interests
of Revenue. He, therefore, set aside the order passed by the
A.O. under section 143(3) of the I.T. Act, 1961 and directed
him to pass necessary consequential order, after giving due
opportunity of being heard to the assessee.
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ITA.No.534/Del./2021 Pawansut
Media Services Pvt. Ltd., Delhi.

3. Aggrieved with such order of the Ld. PCIT the

assessee is in appeal before the Tribunal by raising the

following grounds :
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Media Services Pvt. Ltd., Delhi.
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Media Services Pvt. Ltd., Delhi.

3.1. Learned Counsel for the Assessee referring to the

assessment order submitted that the case was selected for

limited scrutiny and was never converted to full scrutiny.

Referring to the Office Note attached to the assessment
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Media Services Pvt. Ltd., Delhi.

order, he submitted that the case was selected for scrutiny

for the following reasons :

1. Low income in comparison to very high
investments.

2. Low income in comparison to high loans/
advances/investment in shares.

3. Large increase in investment in unlisted equities
during the year.

3.2. He submitted that the A.O. has made due

enquiries before completing the assessment and the

Revenue has not proved anything to be wrong. Referring to

the reply given before Ld. PCIT, copy of which is placed at

Pages 6 and 8 of the paper book, he submitted that he has

never stated that the reply given by the assessee is wrong.

Further the Ld. PCIT has not done any enquiry himself.

Referring to pages 23 and 24 of the paper book, Learned

Counsel for the Assessee drew the attention of the Bench to

the queries put by the A.O. during the course of assessment
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Media Services Pvt. Ltd., Delhi.

proceedings and specifically drew the attention of the Bench

to Question Numbers.8, 9 and 10 at Page No.24 which are

as under :

“8. Please furnish detail & justification of low income
in comparison to high loans/advances/
investments in shares and explain the reason
thereof.

9. Please furnish detail and justification of low income
in comparison to very high investments.

10. Please furnish details of large increase in
investments in unlisted equities during the year.
Also file details of funds deployed for such
investment.”

3.3. Referring to the reply given by the assessee, copy

of which is placed at Page Numbers 25 to 27 of the paper

book, he submitted that assessee has given the list of

investment during the year with valuation as on 31.03.2015.

He submitted that the limited scrutiny was never converted
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ITA.No.534/Del./2021 Pawansut
Media Services Pvt. Ltd., Delhi.

to full scrutiny. Referring to the decision of Hon’ble Delhi
High Court in the case of PCIT vs., M/s. Brahma Centre
Development Pvt. Ltd., vide ITA.No.116 & 118/2021 Dated
05.07.2021, the Learned Counsel for the Assessee drew the
attention of the Bench to Page Numbers 7 to 16 of the order
and submitted that the Hon’ble Delhi High Court in the said
decision has held that the standard to be adopted while
dealing with the issue as to whether or not an A.O. has
carried out an enquiry or verification, all that the Court is
required to ascertain is as to whether the A.O. applied his
mind. The fact that the A.O. has not given reasons in the
assessment order is not indicative, always, of whether or not
he has applied his mind. He submitted that it has been held
that inadequacy in conduct of enquiry cannot be the reason
based on which powers under Section 263 of the I.T. Act can
be invoked to interdict an assessment order. He submitted
that it has further been held that the error should be one
that is not debatable or a plausible view. Section 263 of the
Act invests a power of revision in a superior officer and,
therefore, by the very nature of the power, does not allow for
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Media Services Pvt. Ltd., Delhi.

supplanting or substituting the view of the A.O. The
appreciation of material placed before the A.O. is, exclusively
within his domain which cannot be interdicted by a superior
officer while exercising powers under Section 263 of the Act
only on the ground that if he had appraised the said
material, he would have come to a different conclusion. He
accordingly submitted that the issue stands decided in
favour of the assessee by the recent decision of the Hon’ble
Delhi High Court in the case of PCIT vs., M/s. Brahma
Centre Development Pvt. Ltd., (supra) and, therefore, the
order of the PCIT is to be set aside and the grounds raised
by the assessee should be allowed.

4. The Ld. D.R. on the other hand heavily relied on

the order of the Ld. PCIT. He submitted that in the instant

case the Ld. PCIT has recorded a finding that it is a case of

lack of enquiry for which he resorted to revisional powers as

per the provisions of Section 263 of the Act. He submitted

that Explanation-2 has been inserted in Section 263 of the

I.T. Act by the Finance Act, 2015 w.e.f. 01.06.2015. He also

relied on the following decisions :
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ITA.No.534/Del./2021 Pawansut
Media Services Pvt. Ltd., Delhi.

1. Jalgaon People’s Co-op Bank Ltd., vs., PCIT
[2021] 127 taxmann.com 243 (Pune-Tribu.).

2. Vedanta Ltd., vs., CIT [2021] 124 taxmann.com
435 (Bombay).

3. Babulal S. Solanki vs., ITO, Ward-7(1)(1) [2019]
104 taxmann.com 155 [Ahmedabad – Tribu.].

4. Kerala State Electricity Board Ltd., vs., DCIT
[2019] 111 taxmann.com 353 [Cochin-Tribu.].

5. PCIT vs., Venus Woollen Mills [2019] 105
taxmann.com 287 [Punjab & Haryana].

6. Jeevan Investment & Finance (P.) Ltd., vs., CIT
[2017] 88 taxmann.com 552 [Bombay].

7. Anuj Jayendra Shah vs., PCIT [2016] 67
taxmann.com 38 [Mumbai-Tribu.].

8. Nagal Garment Industries (P.) Ltd., vs., CIT [2020]
113 taxmann.com 4 [M.P.].
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Media Services Pvt. Ltd., Delhi.

9. Subhlakshmi Vanijya (P.) Ltd., vs., CIT [2015] 60
taxmann.com 60 [Kolkata-Tribu.].

10. S. Manickavasagam vs., ITO vide ITA.No.382/
Mad./2007 Dated 17.12.2008.

11. Deniel Merchants Pvt. Ltd., vs., ITO vide Appeal
No.2396/2017 dated 29.11.2017.

12. Malabar Industrial Co. Ltd., vs., CIT [2000] 243
ITR 83 [SC].

13. Rajmandir Estates (P.) Ltd., vs., PCIT [2016] 386
ITR 162 (Cal.)

14. Rajmandir Estates (P.) Ltd., vs., PCIT [2017] 245
Taxman 127 [SC].

15. CIT vs., Infosys Technologies Ltd., 341 ITR 293
(Kar.)

16. Gee Vee Enterprises vs., Addl. CIT 99 ITR 374
(Del.)
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Media Services Pvt. Ltd., Delhi.

17. Order of ITAT, Delhi Bench in the case of Perfetti
Van Melle India Pvt. Ltd., vide ITA.No.3046/Del./
2016 dated 11.01.2019.

18. Order of ITAT, Delhi Bench in the case of Ramesh
Kumar vide ITA.No.1982/Del./2018 dated
25.01.2019.

19. Order of ITAT, Delhi Bench in the case of Shanker
Tradex Pvt. Ltd., vs., PCIT vide ITA.No.2999/Del./
2017 dated 16.04.2018.

20. Order of ITAT, Delhi Bench in the case of Surya
Financial Services Ltd., vs., PCIT [2018-TIOL-74-
ITAT-DEL] Order Dated 08.01.2018.

21. CIT vs., Ashok Logani [2011] 347 ITR 22 (Del.).

22. Order of ITAT, Delhi Bench in the case of Pooja
Gupta in ITA.No.4057/Del./2018 Dated
31.01.2019.

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Media Services Pvt. Ltd., Delhi.

23. Shree Manjunathesware Packing Products &

Camphor Works vs., CIT [1998] 231 ITR 53 [SC].

24. Order of ITAT, Delhi Bench in the case of PTC
Impex (India) Pvt. Ltd., vs., CIT vide ITA.,No.2860/
Del./2010 dated 03.04.2018.

5. We have considered the rival arguments made by

both the sides, perused the orders of the A.O. and the Ld.

PCIT and the paper book filed on behalf of the assessee. We

have also considered the various decisions cited before me.

We find the case of the assessee was selected for limited

scrutiny for the following reasons :

1. Low income in comparison to very high
investments.

2. Low income in comparison to high loans/
advances/investment in shares.

3. Large increase in investment in unlisted equities
during the year.
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ITA.No.534/Del./2021 Pawansut
Media Services Pvt. Ltd., Delhi.

5.1. We find the A.O. vide notice dated 142(1) dated

03.08.2017 has asked the assessee, inter alia, to furnish the

following details :

“8. Please furnish detail & justification of low income
in comparison to high loans/advances/
investments in shares and explain the reason
thereof.

9. Please furnish detail and justification of low income
in comparison to very high investments.

10. Please furnish details of large increase in
investments in unlisted equities during the year.
Also file details of funds deployed for such
investment.”

5.2. We find the assessee vide reply dated 01.12.2017

had filed the details of investment for the A.Y. 2015-2016 as

per the Annexure. The summary sheet of list of investment

appearing at Page No.27 reads as under :
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ITA.No.534/Del./2021 Pawansut
Media Services Pvt. Ltd., Delhi.

5.3. We find before the Ld. PCIT the assessee had filed

the date-wise chart of notice issued by the A.O. as well as

the submission of the assessee to such notice as per Para-

2.2 of the reply dated 20.07.2020 which reads as under :
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Media Services Pvt. Ltd., Delhi.

5.4. Further the submission of the Learned Counsel

for the Assessee that limited scrutiny was never converted to

full scrutiny could not be contradicted by the Ld. D.R.

5.5. We find a somewhat identical issue had come-up

before the Hon’ble Delhi High Court in the case of PCIT vs.,

M/s. Brahma Centre Development Pvt. Ltd., (supra). In that

case the order under section 143(3) was passed on

31.01.2017 and 27.09.2017 for the A.Ys. 2012-13 and 2013-

14 wherein the A.O. accepted the interest earned by the

assessee against the fixed deposits were adjusted i.e.,

deducted from the value of the inventory and not credited to

the P & L A/c. The Ld. PCIT noted that the Tax Auditor in

the Report filed in Form No.3CD had observed that interest

earned on fixed deposits pertain to “Other Income” and had

not been credited to the P & L A/c. The interest earned on

fixed deposits in A.Y. 2012-13 was Rs.9,47,04,585/-

whereas in A.Y. 2013-14, the interest earned on fixed

deposits was Rs.4,32,91,517/-. The Ld. PCIT invoking the

powers under section 263 of the Act held that the orders had

been passed without making any enquiries as to whether the
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Media Services Pvt. Ltd., Delhi.

interest earned by the assessee had any nexus with the real
estate project, the construction of which was undertaken by
the assessee. He accordingly held that the orders passed by
the A.O. were erroneous in so far as they were prejudicial to
the interests of the Revenue. The assessee filed an appeal
before the Tribunal and the Tribunal set aside the order
passed under section 263 and allowed the appeal filed by
the assessee. When the Revenue preferred an appeal before
the Hon’ble Delhi High Court, the Hon’ble High Court in
ITA.Nos.116 & 118/2021 order dated 05.07.2021 dismissed
the appeal filed by the Revenue by observing as under :

“Issue no. (ii) :

10. The standard to be adopted while dealing with the issue as to

whether or not an AO has carried out an enquiry or verification, all that the

Court is required to ascertain is as to whether the AO applied his mind.

10.1. The fact that the AO has not given reasons in the assessment

order is not indicative, always, of whether or not he has applied his mind.

Therefore, scrutiny of the record, is necessary and while scrutinising the record

the Court has to keep in mind the difference between lack of enquiry and

perceived inadequacy in enquiry. Inadequacy in conduct of enquiry cannot be

the reason based on which powers under Section 263 of the Act can be invoked

to interdict an assessment order. The observations made in this behalf, by the

Division Bench of this Court, in Commissioner of Income-tax vs. Sunbeam

Auto Ltd., [2010] 189 Taxman 436 (Delhi) / [2011 ] 332 ITR 167 (Delhi) being

apposite, are extracted hereafter.

“12. We have considered the rival submissions of the counsel on the
other side and have gone through the records. The first issue
that arises for our consideration is about the exercise of power
by the Commissioner of Income - tax under section 263 of the
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Media Services Pvt. Ltd., Delhi.
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Media Services Pvt. Ltd., Delhi.
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5.6. Since in the instant case the A.O. had indeed

made enquiries as per the reasons for which the case was

selected for limited scrutiny and the case was not converted

to full scrutiny, therefore, respectfully following the decision

of the Hon’ble Delhi High court in the case of PCIT vs., M/s.

Brahma Centre Development Pvt. Ltd., (supra), we hold that

the Ld. PCIT was not justified in assuming the jurisdiction

under section 263 of the I.T. Act, 1961. We, therefore, set

aside the Order of the Ld. PCIT and allow the grounds raised

by the assessee on this issue.

5.7. So far as various decisions relied on by the Ld.

D.R. are concerned, we are of the considered opinion that

these are distinguishable and not applicable to the facts of
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Media Services Pvt. Ltd., Delhi.

the present case especially when the case of the assessee

which was selected for limited scrutiny was never converted

to full scrutiny and the assessee had submitted all the

details as called for by the A.O. from time to time for the

reasons for which the case was selected for limited scrutiny.

The grounds raised by the assessee are accordingly allowed.

6. In the result, appeal of the assessee is allowed.

Order pronounced in the open Court on 14.10.2021.

Sd/- Sd/-
(AMIT SHUKLA) (R.K. PANDA)
JUDICIAL MEMBER ACCOUNTANT MEMBER

Delhi, Dated 14th October, 2021

VBP/-
Copy to

1. The appellant
2. The respondent
3. CIT(A) concerned
4. CIT concerned
5. D.R. ITAT ‘F’ Bench, Delhi
6. Guard File.

// By Order //

Assistant Registrar : ITAT Delhi Benches :
Delhi.