In a recent development, the Income Tax Appellate Tribunal (ITAT) has held that the Standard Operating Procedure (SOP) guidelines issued by the Central Board of Direct Taxes (CBDT) in respect of listed scrips cannot be made applicable for unlisted scrips.
The decision was made in the case of M/s. Pantime Finance Company Pvt. Ltd. vs Income Tax Officer (ITO).
The ITAT observed that the base order seeking to be revised was bad in law and liable to be quashed due to various legal infirmities. It was also stated that any subsequent proceedings on the said illegal base order would also be automatically quashed.
Therefore, the revision order passed under Section 263 of the Act was to be quashed both on law and on merits.
Section 263 of the GST Act pertains to revisional authority of the Commissioner. It empowers the Commissioner to revise any order passed by an adjudicating authority, if such order is found to be erroneous, prejudicial to the interests of the revenue, or in contravention of any provision of the GST Act.
The ITAT further noted that even on the merits of the revision order passed by the ld. PCIT, it was stated that M/s Aditi & Finance Pvt Ltd is a penny stock and that SOP guidelines issued by the CBDT had not been followed by the AO while framing the reassessment.
However, it was pertinent to note that penny stock SOP guidelines had been issued by CBDT only in respect of listed scrips. In the present case, Aditi & Finance Pvt Ltd scrip is not listed in any stock exchange.
Therefore, the SOP guidelines issued by CBDT cannot be made applicable for unlisted scrips.
The PCIT had assumed revision jurisdiction on an incorrect assumption of fact and an incorrect application of CBDT guidelines, the Tribunal Bench observed. Consequently, the ITAT held that the revision order passed under Section 263 of the Act is to be quashed both on law and on merits. The grounds raised by the assessee were allowed.
This decision is expected to have a significant impact on the treatment of penny stocks in tax assessments and reassessments going forward.
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