S. 263 : Commissioner-Revision of orders prejudicial to revenue-AO examined the issue-PCIT cannot demonstrate the error or lack of enquiry-Cannot be deemed to be erroneous-S. 56(2)(viia) not applicable to gifting of shares of a listed company. [S. 56(2)(viia)]

Where the assessee is a partnership firm wherein a Trust held 97 per cent partnership share and 1 per cent share each is held by three different LLPs in assessee firm. Trustee of the Trust is a private limited company. In the trustee company, Dr. Habil Khorakiwala and Nafisa Khorakiwala were the directors. In view of group restructuring shares of a listed company were gifted to the partnership Firm. The AO accepted the gift of shares and dividend thereof. The PCIT revised the order under section 263 of the Act on account of lack of enquiry by the AO. It was held that the AO had carried out necessary enquiries, the PCIT could not show that what further enquiry should have been made. Order cannot be deemed erroneous as well as prejudicial to the interest of the revenue with respect to Explanation 2 to section 263 of the Act. Further held that the Gift of shares of a listed company are not chargeable to tax in the hands of the assessee firm under section 56 (2) (viia) of the Act as assessee has received gift of shares of a company in which public are substantially interested which could not have been taxed under the said provision. (ITA. 726/Mum/2021, dt. 7-1-2022) (AY.2015-16)

Humuza Consultants v. PCIT (Mum.)(Trib.)

[Coram : HON’BLE SHRI PRASHANT MAHARISHI, AM AND HON’BLE SHRI PAVAN KUMAR GADALE, JM]