2018 (3) TMI 1938 - AT - Income Tax

Revision u/s 263 by CIT - assessment order passed under section 143(3) r.w.s. 153C - Assessment u/s 153A of the Act after obtaining approval of Additional CIT under section 153D - HELD THAT - The assessment in the present case has been completed by the Assessing Officer by passing order under section 143(3) r.w.s. 153C of the Act after taking the approval of JCIT, Central Range, Nashik and following the ratio laid down in Rasiklal M. Dhariwal (HUF) Vs. CIT 2016 (12) TMI 1868 - ITAT PUNE we hold that exercise of revisionary powers by the Commissioner is both incorrect and invalid in law. The grounds of appeal raised by assessee are thus, allowed.

Summary

Issues Involved:
1. Validity of the exercise of jurisdiction by the Commissioner of Income Tax (Central), Nagpur under Section 263 of the Income Tax Act, 1961.
2. Justification for invoking Section 263 due to alleged lack of verification by the Assessing Officer (AO).
3. Determination of the transaction with M/s. Jai Prakash Strips Ltd. as a sham transaction.
4. Direction to initiate penalty proceedings by the Commissioner of Income Tax (Central), Nagpur.

Detailed Analysis:

1. Validity of the Exercise of Jurisdiction under Section 263:
The primary issue in these appeals was the exercise of jurisdiction by the Commissioner of Income Tax (Central), Nagpur under Section 263 of the Income Tax Act, 1961. The Tribunal noted that the assessment in the case was framed under Section 153A r.w.s. 143(3) of the Act, with the approval of the Joint Commissioner of Income Tax, Central Range, Nashik. The Tribunal examined whether the assessment orders, which had obtained prior approval from the Joint Commissioner, could be revised under Section 263. It was concluded that the Commissioner was not justified in exercising revisionary powers under Section 263 because the assessments were already scrutinized and approved by a higher tax authority.

2. Justification for Invoking Section 263 Due to Alleged Lack of Verification by AO:
The Commissioner invoked Section 263 on the grounds that the AO had not verified whether the assessee had actually paid ?1.19 crores to M/s. Jai Prakash Strips Ltd. and the business expediency of the compensation paid. The Tribunal found that the AO had conducted a thorough examination during the assessment proceedings, including verifying the books of accounts and the seized documents. The Tribunal referenced the case of Rasiklal M. Dhariwal (HUF) V/s. CIT, which held that if the AO had conducted inquiries and applied his mind to the facts, the assessment could not be termed erroneous merely because the Commissioner disagreed with the conclusion.

3. Determination of the Transaction with M/s. Jai Prakash Strips Ltd. as a Sham Transaction:
The Commissioner set aside the assessment by holding the transaction with M/s. Jai Prakash Strips Ltd. as a sham and executed only to book expenditure. The Tribunal found that the AO had verified the transaction during the assessment proceedings and accepted it after due application of mind. The Tribunal cited the case of Gabriel India Ltd, where it was held that an order could not be termed erroneous unless it was not in accordance with law. The Tribunal concluded that the Commissioner did not have the power to re-examine the accounts and determine the income himself unless the decision of the AO was unsustainable in law.

4. Direction to Initiate Penalty Proceedings:
The Commissioner directed the AO to initiate penalty proceedings wherever applicable, despite this issue not being part of the notice issued under Section 263. The Tribunal found this direction unjustified as it was beyond the scope of the original notice. The Tribunal reiterated that the Commissioner could not interfere in the assessment proceedings unless the assessment order was both erroneous and prejudicial to the interests of the Revenue.

Conclusion:
The Tribunal held that the exercise of power by the Commissioner under Section 263 was invalid. The orders passed by the Commissioner, which set aside the assessment orders, were reversed. The Tribunal decided the issue on the jurisdictional ground itself, rendering the grounds raised by the assessee on merits academic in nature. Consequently, all the appeals of the assessees were allowed.