TMI Blog2022 (12) TMI 1266X X X X Extracts X X X X X X X X Extracts X X X X ..... ted by various judicial forums discussed hereunder. The case of the assessee is squarely covered by the decision of Continental Warehousing Corporation (Nhava Sheva) Ltd.[ 2015 (5) TMI 656 - BOMBAY HIGH COURT] and in the case of CIT vs. Kabul Chawla [ 2015 (9) TMI 80 - DELHI HIGH COURT] wherein it has been held that in case of unabated assessment year on the date of search the addition can only be made on the basis of search material and not otherwise. Therefore the order passed by the AO u/s 143(3) r.w.s. 153A of the Act is neither erroneous nor prejudicial to the interest of the revenue and therefore jurisdiction invoked by the ld. PCIT as not in consonance with the provisions of section 263 - Before exercise of jurisdiction u/s263 of the Act the AO has to satisfy the twin conditions as provided in section 263 of the Act .i.e. the order purported to be revised has to erroneous as well as prejudicial to the interest of the revenue and even if first conditions is satisfied or vice versa , the jurisdiction is not available to the ld PCIT as has been held in the case of Malabar Industrial Co. Ltd. [ 2000 (2) TMI 10 - SUPREME COURT] - Accordingly, we quash the order passed u/ ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 13.05.2016 which was duly served upon the assessee and was also complied by the assessee by filing return of income on 23.06.2016 declaring total income of Rs. 12,00,01,934/-. Thereafter the AO issued various statutory notices to the assessee which were duly attended to by the assesse and assessment was finally completed vide order dated 31.12.2016 passed u/s 153A read with 143(3) of the Act. Upon perusal of the said assessment the Ld. PCIT observed that the AO has allowed the claim of deduction u/s 35(2AB) of the Act without verifying the conditions as provided under the Act. As such the assessment was framed without making any verification which should have been made by the AO. Similarly the ld. PCIT observed that AO has also accepted the claim of unabsorbed depreciation as well as weighted deduction u/s 35(2AB) of the Act and thereby allowing excess relief to the assessee and therefore the said failure on the part of the AO to make necessary enquiry or verification rendered the assessment order so framed as erroneous and prejudicial to the interest of the revenue. Accordingly a show cause notice was issued u/s 263 of the Act dated 11.02.2019 as to why the assessment order dated ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... f the Act and also in respect of excess allowance of unabsorbed depreciation. It is also a settled and undisputed position as on date that in an unabated year the addition can only be made on the basis of incriminating material. Therefore having regards to the legal position, the AO framed the assessment u/s 143(3) r.w.s. 153A of the Act without making any addition in respect of claim u/s 35(2AB) of the Act or with regard to the unabsorbed depreciation in consonance with provisions of the Act as interpreted by various judicial forums discussed hereunder. The case of the assessee is squarely covered by the decision of Hon ble Bombay High Court in the case of CIT vs. Commissioner of Income-tax-II, Thanev.Continental Warehousing Corporation (Nhava Sheva) Ltd. (supra) and the decision of Hon ble Delhi High Court in the case of CIT vs. Kabul Chawla (supra) wherein it has been held that in case of unabated assessment year on the date of search the addition can only be made on the basis of search material and not otherwise. Therefore the order passed by the AO u/s 143(3) r.w.s. 153A of the Act is neither erroneous nor prejudicial to the interest of the revenue and therefore jurisdiction i ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... . A.R. challenged the revisionary jurisdiction exercised by the Ld. PCIT u/s 263 of the Act on three counts. First that the proceedings u/s 263 of the Act has to initiated by the Ld. PCIT on the basis of his examination of assessment records upon which he is of the belief that the order passed by the ld AO is erroneous for the reason that the same is either contrary to the facts on records i.e the AO has passed the order on wrong appreciation of facts or the order is not in accordance with the provisions of the Act. The Ld. PCIT has also to records a satisfaction that the wrong order has caused prejudice to the revenue. However the ld AR argued nothing of this sort has happened and revisionary proceedings were invoked at the instance of the AO as the AO has moved the proposal and the ld. PCIT has acted on the said proposal which has been mentioned the revisionary by the ld PCIT and therefore the jurisdiction exercised is invalid. In defense of his arguments the ld counsel relied on the following decisions: i) Pr. CIT vs. Sinhotia Metals Minerals Pvt. Ltd. (IA GA No. 11/2019- ITAT/104/2019)(HC) ii) Manish Chirania vs. PCIT , 15 Kol (Kolkata ITAT) (ITA No. 1161/Kol/2019 d ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 1) of] section 153A or the assessment year referred to in clause (b) of sub-section (1) of section 153B, except with the prior approval of the Joint Commissioner. It is evident from the above that there is no concept of any order to be passed by the Joint / Addl. Commissioner u/s.153D while granting approval for the search assessment. This being the clear provisions of the Statute, any approval u/s.!53D would not be subject matter of any 263 proceedings. As orally argued by me before the Hon'ble Bench, this is for the simple reason that the approval u/s.153D does not constitute a separate order. It is also not out of place to mention that the provisions of section 263 would be applicable only to orders passed by the Assessing Officer as explicitly mentioned in the section itself. Section 2(7A) defines an Assessing Officer and the words Additional Commissioner / Joint Commissioner mentioned in this subsection would only be AOs, if they are directed under clause (b) of sub-section 4 to section 120 to exercise powers and functions conferred on an AO. It is submitted that in case of this search assessment no such power as envisaged in section 2(7A) has been conferred o ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... out the fact that Barium Division was having outstanding liability of the advance given by Chrome Division at the time of demerger. He was also aware of the fact that outstanding liability was converted as advance given to assessee against which shares of newly formed company i.e. VBCPL were allotted to assessee and his associates. Therefore, it is clear from the assessment order that Assessing Officer has examined the issue of conversion of the outstanding liability of Barium Division to advance in the name of assessee through journal entries as well as allotment of shares against such advance to assessee and his family members. Furthermore, from para 2.3 of impugned order of learned CIT, it becomes clear that Assessing Officer while forwarding the draft assessment order for approval, after considering appraisal report has proposed to treat the conversion of outstanding liability of Barium Division as advance to assessee in the books of VCPL as deemed dividend u/s 2(22)(e). However, while according his approval in terms with section 153D, Addl. CIT, who is range head directed Assessing Officer not to make addition u/s 2(22)(e). The reasoning of the Addl. CIT is, advance created in ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... approving the draft assessment order. Therefore, if at all, there is any error, it is in the order of the range head and not in the assessment order. Without revising the directions of addl. CIT, assessment order could not be revised. 24. Furthermore, it is clear from the discussions made by ld. CIT, the reasons on which range head i.e. Addl. CIT disapproved treating the advance as deemed dividend u/s 2(22)(e) is because it is converted as advance in the name of assessee merely through book entries and actually no money was advanced to assessee and secondly the company i.e. VCPL was not having accumulated profits Ch. Krishna Murthy at the time of such payment. Though, learned CIT has accepted the fact that in reality no money was advanced by the company to assessee, but, according to him, by virtue of such a transaction assessee and his family members have become owner of shares worth Rs. 4 crores in the newly formed company. According to him, in these circumstances, journal entries passed in the books of account by converting the outstanding liability of the newly formed company as advance given to assessee will attract provisions of section 2(22)(e). In this context, he ha ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... sible views, assessment order cannot be treated as erroneous. More so, when assessment order has been passed in terms with section 153D of the Act and ld. CIT has not revised the directions of addl. CIT. In these circumstances, as one of the conditions of section 263 is not satisfied, the impugned order passed u/s 263 is not valid. Accordingly, we set aside the impugned order of learned CIT and restored the assessment order passed. 25. As we have held the revision order to be invalid for the reasons stated above, the other issues raised by assessee in the grounds of appeal relating to the absence of incriminating material, etc. are not required to be gone into. For the very same reason, additional ground is also not required to be adjudicated. 8. The Mumbai E Bench of the Tribunal in the case of Shri Surendra L. Hiranandani vs. Pr. CIT in ITA Nos. 3226, 3227, 3227, 3228, 3229, 3230, 3231 3232/M/2017, order dt. 14/02/2018, order dt. 14/02/2018, held as under:- 25. We find that assessment order u/s.143 r.w.s.153A of the Act was passed after getting approval of ACIT as per provisions of section 153D of the Act. We find that the order u/s.143A r.w.s. 153 of the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rs. 2005- 06 to 2010-11 he submitted that the Tribunal in the said decision, following various decisions including the decision of Hon'ble Allahabad High Court in the case of CIT Vs. Dr. Ashok Kumar vide Income Tax Appeal No.192/2000 order dated 06-08-2012, has held that assessment order approved by the Addl.CIT u/s.153D cannot be subjected to revise u/s.263 of the I.T. Act. 12. We have considered the rival arguments made by both the sides, perused the orders of the AO and the Ld.CIT and the paper book filed on behalf of the assessee. 14. We find merit in the above submission of the Ld. Counsel for the assessee. We find the Lucknow Bench of the Tribunal in the case of MehtabAlam Vs. ACIT vide ITA Nos.288 to 294/Lkw/2014 order dated 18-11-2014 while deciding an identical issue has observed as under. 14.1 We find the Hyderabad Bench of the Tribunal in the case of CH. Krishna Murthy Vs. ACIT vide ITA No.766/Hyd/2012 order dated 13-02-2015 following the decision of the Lucknow Bench of the Tribunal in the case of MehtabAlam (Supra) held that CIT is not justified in assuming jurisdiction u/s.263 when the order has been passed in terms of section 153D of the Act. 14 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ed with the approval of the Addl. CIT and their Lordships have held that the Assessing Officer was fully alive about the fads of the case and that is why he got necessary approval of the Addl. CIT before completing the assessment orders for all the assessment years and once that is not disputed by the Revenue, then the Id. Commissioner of Income-tax would not be justified in interfering in the approval according by the Addl. CIT for framing the assessment order and than there was no case for setting aside the assessment order for the assessment years in question. 14.1 We find the Hyderabad Bench of the Tribunal in the case of CH. Krishna Murthy v. ACIT vide ITA No. 766/Hyd/2012 order dated 13-02-2015 following the decision of the Lucknow Bench of the Tribunal in the case of Mehtab Alam (Supra) held that CIT(A) is not justified in assuming jurisdiction u/s. 263 when the order has been passed in terms of section 153D of the Act. 14.2 We find the Hyderabad Bench of the Tribunal in the case of Trinity Infra Ventures Ltd. (Supra) had an occasion to decide an identical issue and it held that the assessment order approved by the Addl. CIT u/s. 153D cannot be subject to revisi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... assed 263 of the Act is also invalid and nullity. The appeal of the assessee is allowed. 16. The issue raised in the various grounds of appeal in IT(SS)A Nos. 23 to 25/Kol/2019 for AY 2013-14 to 2015-16 by the assessee are similar as decided by us in IT(SS)A Nos. 22/Kol/2019 for AY 2012-13. Accordingly our finding in IT(SS)A Nos. 22/Kol/2019 would, mutatis mutandis, apply so these appeals as well. Consequently these appeals of the assessee are allowed. 17. Now we shall take in ITA No. 201/Kol/2021 for AY 2016-17. 18. Issue raised in ground no. 1 is against the invalid exercise of jurisdiction by Ld. PCIT thereby setting aside the order passed u/s 143(3) of the Act dated 31.12.2018 without satisfying the conditions laid down u/s 263 of the Act. 19. Facts in brief are that the assessment was framed u/s 143(3) vide order dated 31.12.2018. The Ld. PCIT on perusal of the said order revised the assessment on the same ground on which it was revised in the earlier years right from 2009-10 to 2015- 16 on the ground of wrongly allowing the claim u/s 35(2AB) of the Act without verifying the conditions as laid down in the Act and treated the order passed as erroneous and prejudicia ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nt of Scientific Industrial Research, Govt. of India and AO has no jurisdiction to question the same. The case of the assessee is squarely covered by the decision of Co-ordinate Bench of Kolkata in the case of Texmac Rail Engineering Ltd. (supra) wherein the Tribunal has held as under: 11. We have given a very careful consideration to the rival submissions. We are of the view that in the facts and circumstances of the present case, the CIT ought not to have exercised jurisdiction u/s.263 of the Act and set aside the order of the AO. It is undisputed that Department of Scientific and Industrial Research (DSIR) granted recognition to the Assessee for the period from. April 1st, 2010 to 31st March, 2019. It has been held in the decision referred to by the learned counsel for the Assessee in the proceedings before the CIT u/s. 263 of the Act and before the Tribunal that deduction Sec.35(2AB) read with rule 6 does not prescribe any time limit within which application for approval in form No.3CM has to be made. Once approval is granted by DSIR the same would apply till it is revoked. The Hon'ble Gujarat High Court and the Hon'ble Delhi High Court in the case of Claris Life ..... X X X X Extracts X X X X X X X X Extracts X X X X
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