2016 (1) TMI 453 - AT - Income Tax

Validity of revision u/s 263 - addition u/s 68 - Held that - In view of the discussion and following the view taken in Subhlakshmi Vanijya Pvt. Ltd. 2015 (8) TMI 174 - ITAT KOLKATA we have drawn the following conclusions - A. Contention of the assessee that since the AO of the assesseecompany was not empowered to examine or make any addition on account of receipt of share capital with or without premium before amendment to section 68 by the Finance Act, 2012 w.e.f. A.Y. 2013-14 and hence the CIT by means of impugned order u/s 263 could not have directed the AO to do so, is unsustainable. B. Failure of the AO to give a logical conclusion to the enquiry conducted by him gives power to the CIT to revise such assessment order, by holding that - i) the enquiry conducted by the AO in such cases can t be construed as a proper enquiry; ii) CIT u/s 263 can set aside the assessment order and direct the AO to conduct a thorough enquiry, notwithstanding the jurisdiction of the AO in making enquiries on the issues or matters as he considers fit in terms of section 142(1) and 143(2) of the Act, which is relevant only up to the completion of assessment ; iii) Inadequate inquiry conducted by the AO in the given circumstances is as good as no enquiry and as such, the CIT was empowered to revise the assessment order ; iv) The order of the CIT is not based on irrelevant considerations and further in the present circumstances, he was not obliged to positively indicate the deficiencies in the assessment order on merits on the question of issue of share capital at a huge premium ; and v) the AO in the given circumstances can t be said to have taken a possible view as the revision is sought to be done on the premise that the AO did not make enquiry thereby rendering the assessment order erroneous and prejudicial to the interest of the revenue on that score itself. C. In the given facts and circumstances of all such cases, the notices u/s 263 were properly served through affixture or otherwise. Further the law does not require the service of notice u/s 263 strictly as per the terms of section 282 of the Act. The only requirement enshrined in the provision is to give an opportunity of hearing to the assessee, which has been complied with in all such cases. D. Limitation period for passing order is to be counted from the date of passing the order u/s 147 read with sec. 143(3) and not the date of Intimation issued u/s 143(1) of the Act, which is not an order for the purposes of section 263. In all the cases, the orders have been passed within the time limit. E. The CIT having jurisdiction over the AO who passed order u/s 147 read with section 143(3), has the territorial jurisdiction to pass the order u/s 263 andnot other CIT. F. Addition in the hands of a company can be made u/s 68 in its first year of incorporation. G. After amalgamation, no order can be passed u/s 263 in the name of the amalgamating company. But, where the intention of the assessee is to defraud the Revenue by either filing returns, after amalgamation, in the old name or otherwise, then the order passed in the old name is valid. H. Order passed u/s 263 on a non-working day does not become invalid, when the proceedings involving the participation of the assessee were completed on an earlier working day. I. Order u/s 263 cannot be declared as a nullity for the notice having not been signed by the CIT, when opportunity of hearing was otherwise given by the CIT. J. Refusal by the Revenue to accept the written submissions of the assessee sent after the conclusion of hearing cannot render the order void ab initio. At any rate, it is an irregularity. K. Search proceedings do not debar the CIT from revising order u/s 263 passed u/s 147 of the Act. - Decided against assessee

Summary

Issues:
Appeal against orders passed by CIT u/s 263 of the Income-tax Act, 1961.

Analysis:
The Tribunal consolidated appeals from different assessees challenging orders by CIT u/s 263. Despite repeated adjournments sought by the assessees, the Tribunal proceeded ex parte as the issues were already decided against the assessees in previous orders. The cases involved companies with low income, receiving share capital at a high premium. The CITs passed orders u/s 263, which were contested before the Tribunal.

The Tribunal noted similarities with earlier cases and referred to a significant order involving similar issues. The Tribunal concluded that the AO's failure to conduct a proper inquiry empowered the CIT to revise the assessment order. It was held that inadequate inquiry by the AO allowed the CIT to set aside the assessment order. The Tribunal emphasized that the CIT's order need not specify deficiencies in the assessment order regarding share capital at a high premium.

Regarding service of notices u/s 263, the Tribunal found proper compliance with requirements. The limitation period for passing orders was clarified to start from the date of the order u/s 147, not the date of intimation u/s 143(1). The territorial jurisdiction of the CIT over the AO who passed the order was highlighted. The Tribunal also addressed issues related to addition u/s 68 in the first year of incorporation, orders post-amalgamation, and validity of orders passed on non-working days.

The Tribunal upheld the impugned orders based on previous conclusions and dismissed all appeals. The judgment reiterated key legal principles and upheld the CIT's power to revise assessment orders under relevant provisions.