TMI Blog2022 (8) TMI 1013X X X X Extracts X X X X X X X X Extracts X X X X ..... sioner was of the view that once the assessment order was reopened then ld. Assessing Officer was required, not only to examine the item for which it was reopened, but any item which exhibits escapement of income and since ld. Assessing Officer failed to examine the other item which in the opinion of ld. Commissioner as escaped income and, therefore, he termed the reassessment order as erroneous is patently contrary to the decision of the Hon ble three High Courts. Thus the reassessment order cannot be termed erroneous for not examination of other issues than the one it was reopened . As far as original assessment order is concerned, i.e. the order dated 28.12.2016 passed under section 153A/143(3), the action under section 263 is time barred in view of the Hon ble Supreme Court decision in the case of CIT vs.- Alagendra Finance Limited [ 2007 (7) TMI 304 - SUPREME COURT] We are of the view that the impugned order is not sustainable. It is quashed. Assessee appeal allowed. - I.T.A. No. 12/PAT/2022 - - - Dated:- 16-6-2022 - Shri Rajpal Yadav, Vice-President (KZ) And Shri Rajesh Kumar, Accountant Member For the Assessee : Shri S.K. Tulsiyan, Advocate For the Re ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... received that during the course of enquiry in the case of M/s DLS Export Pvt. Ltd. and related parties regarding several inter-bank transfers it was found that the assessee had been the beneficiary for an amount of Rs 67 60 941/- in respect of large inter-bank cash / cheque / RTGS /NEFT transactions without any logical basis which involved accommodation entries by different entry operators through shell / paper companies like Chitraksh Vintrade Pvt. Ltd Sukalyan Infratowers Pvt Ltd., Peacock Vintrade Pvt. Ltd. etc. Hence, I consider the case to be fit for issuing notice u/s 148 of the I.T. Act, 1961, if approved. Yours faithfully, Sd/- (Amab Mukherjee) Assistant Commissioner of Income Tax Central Circle-1. Patna Ld. Assessing Officer thereafter passed an assessment order under section 147 read with section 143(3) on 26.12.2019. The ld. Assessing Officer did not make any addition on the issue for which it was reopened. It is a very brief assessment order and we deem it appropriate to reproduce this assessment order as under:- INCOME TAX DEPARTMENT, PATNA 1. Name and address of the assessee ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Income-tax Act, 1961 on the total income of Rs.2,36,130/- (as per earlier order passed on 28/12/2016). Charge interest as per provision of chapter-XVII of the Income-tax Act, 1961 (u/s 234A, 234B, 234C). Issue demand notice, penalty notice u/s 271(l)(c) etc. Sd/- (Atanu Malik) Assistant Commissioner of Income-Tax Central Circle - 1, Patna 4. Ld. Principal CIT perused the assessment record and formed an opinion that re-assessment order passed by the ld. Assessing Officer is erroneous as much as prejudicial to the interest of the Revenue. Therefore, action under section 263 is required to be taken against the assessee. He issued a show-cause notice under section 263 of the Income Tax Act and copy of the notice available on page no. 44 to 46 of the paper book. We take note of this notice as under:- GOVERNMENT OF INDIA MINISTRY OF FINANCE INCOME TAX DEPARTMENT PCIT (Central), Patna To, PUSHPA SINGH PANCHWATI NEPALI KOTHI, , BORING ROAD,PATNA PATNA 800001 , Bihar India PAN/TAN ANLPS6672A AY: 2012-13 DIN Notice No. ITBA/REV/F/REV1/202122/1037980477(1) ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ng the assessment proceedings, the assessee raised an objection and claimedthat they do not find any credit entry in their bank account in the name of M/s DLS Exports Pvt. Ltd. and related parties like ChitrakshVintrade Pvt. Ltd., Sukalyanlnfratowers Pvt. Ltd., Peacock Vintrade Pvt. Ltd. for Rs. 67,60,941/-. The assessing officer completed the assessment u/s 143(3) read with 147 of Income Tax Act, 1961 without verifying the transaction. On perusal of the case records it is seen that the assessee had claimed in his Income Tax Return in ITR-2 an amount of Rs. 67,50,080/- as exempt income for Long Term Capital Gains from the transactions on which security transaction tax was paid. However, on perusal of assessment record it is evident that no enquiry/verification from stock exchange, broker, purchaser, depository / depository participant/demat account/bank in respect of this exempt income has been done. The assessing officer accepted the claim of the assessee without making enquiry/verification in the above matters and also no effort was made by the assessing officer to verify the facts of assessee being beneficiary of amount of Rs. 67,60,941/- and the claim of exempt i ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 3 of the Income Tax Act, 1961 without any further reference to you. Sd/- SANJEEV SHARMA , PCIT (Central), Patna The ld. Principal CIT thereafter conducted an enquiry and passed the impugned order whereby he has set aside the re-assessment order dated 26.12.2019 and directed the ld. Assessing Officer to pass a fresh assessment order considering all the issues raised in the show-cause notice. 5. The ld. counsel for the assessee while impugning the order of the ld. Principal CIT contended that it is time-barred. He contended that a search action under section 132 of the Income Tax Act was carried out upon the assessee on 08.01.2015. In consequence of this search, assessment was framed under section 153A read with section 143(3) on 28.12.2016. Thereafter the assessment was re-opened by issuance of a notice under section 148 and re-assessment has been framed on 26.12.2019. The ld. Principal CIT found an error in the original assessment order but taking action under section 263 of the Income Tax Act by computing the limitation from the re-assessment order dated 26.12.2019 and, therefore, it is time-barred. In support of his contention, he relied upon the following ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... or before or after the 1st day of June, 1988 by the Assessing Officer shall include- (i) an order of assessment made by the Assistant Commissioner or Deputy Commissioner or the Income Tax Officer on the basis of the directions issued by the Joint Commissioner under section 144A; (ii) an order made by the Joint Commissioner in exercise of the powers or in the performance of the functions of an Assessing Officer conferred on, or assigned to, him under the orders or directions issued by the Board or by the Chief Commissioner or Director General or Commissioner authorized by the Board in this behalf under section 120; (b) record shall include and shall be deemed always to have included all records relating to any proceeding under this Act available at the time of examination by the Commissioner; (c) where any order referred to in this sub-section and passed by the Assessing Officer had been the subject matter of any appeal filed on or before or after the 1st day of June, 1988, the powers of the Commissioner under this sub-section shall extend and shall be deemed always to have extended to such matters as had not been considered and decided in such appeal. (2) No order s ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... a fresh order. At this stage, before considering the multi-fold contentions of the ld. Representatives, we deem it pertinent to take note of the fundamental tests propounded in various judgments relevant for judging the action of the CIT taken u/s 263. The ITAT in the case of Mrs. Khatiza S. Oomerbhoy Vs. ITO, Mumbai, 101 TTJ 1095, analyzed in detail various authoritative pronouncements including the decision of Hon ble Supreme Court in the case of Malabar Industries 243 ITR 83 and has propounded the following broader principle to judge the action of CIT taken under section 263. (i) The CIT must record satisfaction that the order of the AO is erroneous and prejudicial to the interest of the Revenue. Both the conditions must be fulfilled. (ii) Sec. 263 cannot be invoked to correct each and every type of mistake or error committed by the AO and it was only when an order is erroneous that the section will be attracted. (iii) An incorrect assumption of facts or an incorrect application of law will suffice the requirement of order being erroneous. (iv) If the order is passed without application of mind, such order will fall under the category of erroneous order. (v) Ever ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... sment order, the Assessing Officer did not consider this aspect specifically whether the expenditure in question was revenue or capital expenditure. This argument predicates on the assessment order which apparently does not give any reasons while allowing the entire expenditure as revenue expenditure. However, that by itself would not be indicative of the fact that the Assessing Officer had not applied his mind on the issue. There are judgments galore laying down the principle that the Assessing Officer in the assessment order is not required to give detailed reason in respect of each and every item of deduction, etc. Therefore, one has to see from the record as to whether there was application of mind before allowing the expenditure in question as revenue expenditure. Learned counsel for the assessee is right in his submission that one has to keep in mind the distinction between lack of inquiry and inadequate inquiry . If there was any inquiry, even inadequate, that would not by itself, give occasion to the Commissioner to pass orders under section 263 of the Act, merely because he has different opinion in the matter. It is only in cases of lack of inquiry , that such a course ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... om these concerns during the financial year 2011-12 and the assessee annexed the copy of the Bank statement. Ld. Assessing Officer has gone through the record and thereafter accepted the stand of the assessee. He did not make any addition to the income of the assessee and accepted the assessed income as per earlier assessment order dated 28.12.2016. 12. Ld. Principal CIT sought to find an error in the reassessment order for the purpose of exercising the power under section 263. In his opinion, the ld. Assessing Officer should have examined the issue taken up in 263 proceedings, i.e. whether the assessee s claim of long-term capital gain amounting to Rs.65,50,080/- is admissible to her or not. It is pertinent to observe that ld. counsel for the assessee at the time of hearing on the strength of the following decisions- (i) CIT vs.- Jet Airways (I) Limited reported in 331 ITR 236 (Bombay High Court); (ii) Ranbaxi Laboratories Limited reported in 336 ITR page 136 (Delhi High Court); (iii) Md. Juned reported in 353 ITR 172 (Gujarat High Court)-, contended that in a reassessment order, if no addition is being made on an item for which the assessment was reopened, then, a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... The revisionary order under section 263 of the Act was passed on 29.03.2004. This was passed on an issue of lease equalisation fund. The stand of the assessee was that this issue attained finality in the original assessment order, which attained finality upto 30.03.1998 and any action under section 263 on 29.03.2004 is barred by limitation. In this factual background, Hon ble Supreme Court has examined this issue and the observations made in paragraphs no. 7, 10 and 15 of the judgment are worth to note, which read as under:- 7. A bare perusal of the order passed by the Commissioner of income Tax would clearly demonstrate that only that part of order of assessment which related to lease equalisation fund was found to be prejudicial to the interest of the Revenue. The proceedings for reassessment have nothing to do with the said head of income. Doctrine of merger, therefore, would not apply in a case of this nature . 10. There may not be any doubt or dispute that once an order of assessment is reopened, the previous underassessment will be held to be set aside and the whole proceedings would start afresh but the same would not mean that even when the subject matter of rea ..... X X X X Extracts X X X X X X X X Extracts X X X X
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