TMI Blog2022 (2) TMI 603X X X X Extracts X X X X X X X X Extracts X X X X ..... directions given by the PCIT to the A.O. in this regard. Revisional powers of the designated authority u/s 263 to reassess order passed with reference to section 147 read with section 148 - Non verification of share application money and share premium receipt by AO - We observe that identical issue has come for adjudication in another case before the Co-ordinate Bench in the case of Shri Bhiva Shankar Rane [ 2016 (8) TMI 1565 - ITAT PUNE] where the legal issue was examined in detail and it was inter alia held that where the A.O. failed to make detailed probe or enquiries on escapement of other possible income unconnected to reasons recorded, the revisional authority cannot compel the A.O. to indulge in making fishing or roving enquiries in exercise of powers conferred under s.263 In the present case, the revisional authority has sought to exercise its powers under section 263 of the Act on the ground that the A.O. has failed to make enquiry on receipts of share application money and share premium. It is an admitted position that the aforesaid point did not form the basis for reopening the assessment. As held in Bhiva Shankar Rane vs. ACIT [ 2016 (8) TMI 1565 - ITAT ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... considered during the original assessment proceedings concerning A.Y. 2011-12. The assessee has challenged the assumption of jurisdiction by the PCIT under section 263 of the Act essentially on the ground that the Assessment Order under revision is neither erroneous nor prejudicial to the interest of the revenue. 3. Briefly stated, the case of the assessee was assessed under section 143(3) of the Act vide order dated 27.04.2014 relevant to A.Y. 2011-12. Thereafter, the case was re-opened by issuance of notice under section 148 of the Act and after recording of reasons for escapement of income as reproduced in the reassessment order. The reassessment order was subsequently passed under section 143(3) read with section 147 of the Act dated 29.12.2018. On examination of the reassessment records, the PCIT opined that the reassessment order dated 29.12.2018 is erroneous in so far as it is prejudicial to the interest of the revenue and consequently issued a show cause notice dated 19.03.2021 citing broadly two reasons for such allegation:- i) The assessee has claimed depreciation on bogus purchase of Plant Machinery from Equipment Spares and Repairs Pvt. Ltd. The A.O. while maki ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 143(3) r.w.s. 147 of IT Act was passed on 29.12.2018 by making addition of ₹ 16988406/- and assessed income at Nil/- The assessee is a Pvt. Ltd. company and engaged in the business of manufacturing of designer laminates. In this case, on examination of case file it is observed that the assessing officer had made disallowance of ₹ 287606/- during regular assessment made on 27.03.2014 which was not consider during reassessment and assessed loss of ₹ 18194400/-. The omission resulted in over assessment of loss of ₹ 287606/-. Further, the assessee has claimed depreciation for ₹ 44218159/- including additional depreciation in the computation of income. Further, it was observed that during reassessment the assessing officer made addition for ₹ 16988406/- on account of bogus purchase of Plant and Machinery from M/s Equipment Spares and Repairs Pvt. Ltd. Since, the assessing officer had established and made addition on account of purchase of Plant and Machinery at ₹ 16988406/- was made through bogus purchase bill, the depreciation related to said machinery also required to be disallowed which remain to be done. In view of provis ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ed on 23/03/2021 at 11:30 am in the office of PCIT-1, Central Revenue Building, Civil Lines, Raipur. 5. The PCIT vide its revisionary order under section 263 of the Act dated 28.03.2021 eventually set aside the order passed by the A.O. under section 143(3) read with section 147 of the Act on both the points. As per the revisional order, it was alleged that the A.O. has not conducted proper enquiry on the facts in issue. 6. Aggrieved, the assessee preferred appeal before the Tribunal. 7. When the matter was called for hearing, with reference to the first issue i.e. incorrect allowance of depreciation of ₹ 59,45,940/- on bogus purchase of Plant Machinery, the learned counsel for the assessee fairy submitted that where the A.O. has made disallowance on Plant Machinery, it was permissible for the A.O. to disallow the consequential depreciation within the scope of section 147 of the Act. The issue being connected to the subject matter of reassessment, the action of the PCIT cannot be faulted per se without prejudice to the contentions on bonafides of purchases in the regular appellate proceedings. 8. In the wake of averments made on behalf of the assessee and h ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nd issue. The pertinent question involved for adjudication in the impugned case is whether the designated authority is entitled in law to revise under section 263 of the Act where the reassessment order passed under section 147 lacks enquiry on the issues totally unconnected to the reasons recorded for carrying out reassessment under section 147 of the Act. In other words, a pertinent question comes to the forefront on the of revisional powers of the designated authority under section 263 of the Act to reassess order passed with reference to section 147 read with section 148 of the Act. 12. We observe that identical issue has come for adjudication in another case before the Co-ordinate Bench in the case of Shri Bhiva Shankar Rane vs. ACIT in ITA Nos.813 814/PN/2014 where the legal issue was examined in detail and it was inter alia held that where the A.O. failed to make detailed probe or enquiries on escapement of other possible income unconnected to reasons recorded, the revisional authority cannot compel the A.O. to indulge in making fishing or roving enquiries in exercise of powers conferred under s.263 of the Act. The relevant operative paras of the order of the Coordinat ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 2.1 A pertinent question of law that arises in the subject matter of appeal is the scope of revisionary powers of the CIT under S. 263 to a re-assessment order passed in pursuance of section 147 / 148 of the Act. 12.2 As the assessment sought to be revised was made under section 143(3) r.w.s. 147 of the Act, it is ostensible that the Assessing Officer was required to frame re-assessment of the income chargeable to tax which is found to have escaped assessment in the light of reasons recorded under S. 148(2) before issuance of notice. Indeed, the jurisdiction of the Assessing Officer under S. 147 also extends to other income which may come to his notice subsequently in the course of re-assessment proceedings. However, precise question that emerges is whether the Assessing officer in exercise of powers conferred under S. 147 is under statutory duty to peddle roving enquiries to explore the possibility of escapement on every other item that may possibly give rise to some chargeable income in the hands of an assessee in the garb of assessment of other income without there being any relevant material in the possession of the AO in this regard. 12.3 Section 147 provides tha ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... anted to encompass escapement of other possible income in a given set of facts. Consequently, the alleged inaction of the AO on the issue of correctness of trading results in reassessment proceedings is not fatal or erroneous for the purposes of section 263 of the Act. Hence, the reassessment order passed within the four corner of its authority cannot be dubbed as erroneous per se and is thus is not susceptible to review contemplated under S. 263 of the Act. 12.5 We now proceed to examine the issue of lack of enquiry on unconnected issues in a reassessment proceeding from a different perspective. It is well settled that exercise of statutory powers under S. 263 is dependent upon the existence of certain objective facts. In our view, proposed action as suggested by the CIT runs contrary to the well accepted policy of law that there must be a point of finality on all legal proceedings. Needless to say, the discretion given to the Commissioner is required to be exercised in a judicious manner. On facts, We notice that the Commissioner has merely entertained strong suspicion on the bona-fide of trading results owing to huge losses and observed that in the absence of income reporte ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of section 147 of the Act. Therefore, revisional powers under section 263 cannot be invoked to set aside the reassessment order where the A.O. himself is not competent to embark upon roving enquiries on unconnected issues. Therefore, the subject reassessment order cannot be labelled as erroneous per se on the second issue and thus not susceptible to review contemplated under section 263 of the Act. 14. The remedy available to the PCIT is only with reference to original assessment order passed under section 143(3) of the Act where the issue was subject matter of examination. However, in the light of decision of the Hon ble Supreme Court in CIT vs. Alagendran Finance Limited (supra), the limitation prescribed under section 263(2) would run from original assessment in respect of issue alien to reasons recorded. Thus, when seen qua the original assessment, the revisional order on the second issue is clearly barred by limitation. The action of the PCIT on the second issue thus cannot be countenanced. The directions given by the PCIT thus requires to be quashed and set aside in so far as second issue is concerned. 15. In the result, appeal of the assessee is partly allowed. PR ..... X X X X Extracts X X X X X X X X Extracts X X X X
|
