Once Reassessment Framed By AO Is Not Sustainable,Order U/s 263 Seeking To Revise Reassessment Is Not Acceptable: Delhi ITAT
Pankaj Bajpai
14 March 2024 3:00 PM IST
While allowing the appeal of assessee in respect of the fact that whether the PCIT had validly assumed his revision jurisdiction u/s 263 of the Income Tax Act, 1961, both in law and on facts, the New Delhi ITAT held that the PCIT erred in assumption of jurisdiction u/s 263 of the Income Tax Act, 1961.The Bench of the ITAT comprising of Saktijit Dey (Vice President) and M. Balaganesh...
While allowing the appeal of assessee in respect of the fact that whether the PCIT had validly assumed his revision jurisdiction u/s 263 of the Income Tax Act, 1961, both in law and on facts, the New Delhi ITAT held that the PCIT erred in assumption of jurisdiction u/s 263 of the Income Tax Act, 1961.
The Bench of the ITAT comprising of Saktijit Dey (Vice President) and M. Balaganesh (Accountant Member) observed that, “Once, the reassessment order per se framed by the AO is not sustainable in the eyes of law, any revision order passed thereon u/s 263 seeking to revise such unsustainable order cannot be accepted in the eyes of law and consequential revision order also passed u/s 263 of the Act deserves to be quashed.” (Para 7)
The Bench reiterated while referring to the decision of Delhi Tribunal in the case of Sh. Pramajit Singh vs. PCIT in ITA No. 446/Del/2022 wherein the Tribunal placed reliance on the decision of Hon'ble Jurisdictional High Court in the case of CIT vs. Software Consultants. in ITA No.914 that,” For exercise of power under Section 263 of the Act, it is mandatory that the order passed by the Assessing Officer should be erroneous and prejudicial to the interest of the Revenue. In the present case, the Assessing Officer did not make any addition for the reasons recorded at the time of issue of notice under Section 148 of the Act. This position is not disputed and disturbed by the Commissioner of Income Tax in his order under Section 263 of the Act. Sequitur is that the Assessing Officer could not have made an addition on account of share application money in the assessment proceedings under Section 147/148. Accordingly, the assessment order is not erroneous. Thus, the Commissioner of Income Tax could not have exercised jurisdiction under Section 263 of the Act.”
As per the brief facts of the case, the assessee's case was reopened. To verify the information related to transactions a query letter was issued and served to assessee. The assessee submitted detailed reply and submitted copy of ITR. On perusal of assessee reply it was found that assessee has sold plots and from this amount she has done transaction and purchased RBI bonds and done time deposits. During verification it was noticed that assessee has taken cost of improvement and not produced specific evidence regarding this also assessee has not submitted any cogent reply regarding time deposit held with Union Bank. Thus, assessee has failed to prove genuineness and creditworthiness of above transaction, meaning thereby above transaction has not been disclosed before the department. Since necessary permission u/s 133(6) has already been accorded by the PCIT, there is a reason to believe that the income of Rs.1,27,44,000/- has escaped assessment within the meaning of Sec. 147.
The assessee in response to notice u/s 148 responded that the return already filed on 30/03/2013 declaring taxable income of Rs.3,90,290/- may be considered as a return in response to notice u/s 148. The AO after examining the detailed explanations given by the assessee together with documentary evidences did not draw any adverse inference thereon and accepted the returned income of the assessee in the reassessment order. In other words, no addition was made by the AO in the reassessment proceeding in respect of issues that are subject matter of reasons recorded for reopening the assessment.
This reassessment was sought to be revised by the PCIT by invoking his revision jurisdiction u/s 263 on the issue of capital gains, investment of Rs.5,50,000/- in time deposits with the Axis Bank and deduction u/s 54 on the ground that the AO had not made enquiries on the same thereby making his order erroneous and prejudicial to the interest of the Revenue.
The Bench noted that AO having recorded the reasons for reopening the assessment and having formed a belief that income of the assessee had escaped assessment, had not made any addition in the reassessment proceedings in respect of issues that are subject matter of reopening.
The Bench observed that the AO should have simply dropped the initiation of reassessment proceedings instead of passing a separate reassessment order.
Therefore, on finding error in assumption of PCIT, ITAT allowed the assessee's appeal.
Counsel for Appellant/Taxpayer: Rakesh Gupta
Counsel for Respondent/Department: T James Singson
Case Title: Daya Rani verses CIT
Case Number: ITA No.402/Del/2021
