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2019 (1) TMI 1616 - AT - Income TaxRevision u/s 263 - reopening of the assessment u/s 148 - second round of proceedings on the same set of facts - assessee received accommodation entry - HELD THAT - The assessee filed detailed reply before A.O. at the assessment stage along with documentary evidences and the A.O. called for reply from the Investor under section 133(6) of the I.T. Act which has been also responded by the Investor. A.O. on the basis of evidence and material on record, accepted the returned income and thus, accepted that assessee has received genuine share application money. AO, therefore, accepted the returned income vide impugned re-assessment order dated 19.03.2015. A.O. thereafter again recorded the reasons for reopening of the assessment on 23.03.2016. The details of the same have been placed on record by the Ld. CIT-D.R. The assessee has been supplied copy of the reasons vide letter dated 12.05.2016, copy of the reasons for reopening of the assessment. In the same reasons also, the A.O. has referred to the same facts as were recorded in the reasons for reopening of the assessment on 29.03.2014. A.O. has referred to the same letter of the Investigation Wing dated 12.03.2013 and same facts. A.O. after objection by assessee, dropped the second re-assessment proceedings A.O. on the basis of the same information of receiving accommodation entry as noted in the show cause notice u/s 263 had earlier reopened the assessment in first round of proceedings as well as in the second round of proceedings on the same set of facts and ultimately, dropped the second re-assessment proceedings vide Order dated 05.12.2016. Therefore, the first impugned order under section 147 dated 19.03.2015 stood merged with the second reassessment order dated 05.12.2016 dropping the proceedings under section 263 Thus, there were no justification for the Pr. CIT to initiate the proceedings u/s 263 against the first re-assessment order dated 19.03.2015. Pr. CIT did not assume the jurisdiction validly u/s 263 against the second re-assessment order dated 05.12.2016, therefore, the entire proceedings are vitiated and are liable to be quashed. Assessee at the first and second round of reassessment proceedings produced sufficient documentary evidences before A.O. to prove that it has received genuine share application money, therefore, the Ld. Pr. CIT without any justification should not have revised the re-assessment order particularly when no proceedings under section 263 have been initiated against the final assessment order dated 05.12.2016. Assessee rightly contended that when the reasons recorded for reopening of the assessment were the very same reasons for which Ld. Pr. CIT had invoked the jurisdiction under section 263 of the I.T. Act, invocation of Section 263 of the Act is not tenable - Decided in favour of assessee.
Issues Involved:
1. Validity of the reassessment order. 2. Examination of seized material. 3. Jurisdiction of the Principal Commissioner of Income Tax (Pr. CIT) under Section 263 of the Income Tax Act. 4. Adequacy of Assessing Officer's (A.O.) inquiry. 5. Application of the doctrine of merger. Issue-wise Detailed Analysis: 1. Validity of the Reassessment Order: The reassessment order was challenged on the grounds that no notice under Section 143(2) of the Income Tax Act was issued to the assessee before the completion of the reassessment proceedings. The Tribunal noted that the absence of a notice under Section 143(2) renders the reassessment order illegal and bad in law. This was supported by precedents such as the Delhi High Court's ruling in CIT vs. CPR Capital Services Ltd., which held that the absence of a Section 143(2) notice makes the assessment null and void. The Tribunal concluded that only a valid reassessment order can be revised under Section 263, and since the reassessment order was invalid, the proceedings under Section 263 were also invalid. 2. Examination of Seized Material: The Pr. CIT argued that the A.O. did not examine the seized material from the premises of Shri S.K. Jain, which was crucial for determining the genuineness of the transactions. However, the Tribunal found that the A.O. had indeed referred to the seized material and the appraisal report during the reassessment proceedings. The A.O. had also conducted inquiries and received confirmations from the investor companies under Section 133(6) of the Income Tax Act. The Tribunal held that the A.O. had made adequate inquiries and had considered the relevant material, thus fulfilling his duty as an investigator and adjudicator. 3. Jurisdiction of the Pr. CIT under Section 263: The Pr. CIT invoked Section 263, contending that the reassessment order was erroneous and prejudicial to the interests of the Revenue because the A.O. failed to consider the seized material. However, the Tribunal noted that the A.O. had conducted a thorough inquiry and had accepted the transactions as genuine based on the evidence provided. The Tribunal emphasized that the Pr. CIT cannot substitute his opinion for that of the A.O. if the A.O. has taken a plausible view. The Tribunal cited the decision in CIT vs. Gabriel India Ltd., which held that the Pr. CIT cannot revise an order merely because he has a different opinion. 4. Adequacy of A.O.'s Inquiry: The Tribunal found that the A.O. had conducted a detailed inquiry during the reassessment proceedings. The A.O. had issued notices under Sections 143(2) and 142(1), called for information from the assessee, and received confirmations from the investor companies. The Tribunal held that the A.O. had made adequate inquiries and had applied his mind to the material on record. The Tribunal referred to the Delhi High Court's decision in CIT vs. Sunbeam Auto Ltd., which held that if the A.O. has made inquiries and taken a plausible view, the order cannot be considered erroneous. 5. Application of the Doctrine of Merger: The Tribunal noted that the A.O. had reopened the assessment twice based on the same set of facts and had ultimately dropped the second reassessment proceedings. The Tribunal held that the first reassessment order dated 19.03.2015 had merged with the second reassessment order dated 05.12.2016, which dropped the proceedings. Consequently, the Pr. CIT could not invoke Section 263 to revise the first reassessment order. The Tribunal cited the decision in Dewas Silk Mill vs. CIT, where it was held that the dropping of reassessment proceedings is a valid order that can be revised under Section 263. Conclusion: The Tribunal set aside the order of the Pr. CIT passed under Section 263, holding that the reassessment order was invalid due to the absence of a notice under Section 143(2). The Tribunal also found that the A.O. had conducted adequate inquiries and had considered the relevant material. Therefore, the Pr. CIT could not revise the reassessment order under Section 263. The appeals of the assessee were allowed.
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