2020 (9) TMI 1277 - AT - Income Tax

Revision u/s 263 - As per CIT AO failed to initiate penalty proceedings u/s 271(1)(C) of the Act hence the assessment order passed by the AO was erroneous and prejudicial to the interest of Revenue - HELD THAT - ITAT Coordinate Bench Jaipur 2007 (5) TMI 274 - ITAT JAIPUR-A had already deleted the entire addition mainly with respect to which the ld. CIT (Adm) invoked Section 263 - Since the very additions are not in existence at this stage therefore sustaining the present order of ld. Pr.CIT u/s 263 of the Act is not in accordance with law. However the ld. DR submitted before us that they have challenged the order passed by the ITAT Jaipur bench before the Hon ble Rajasthan High Court as ITAT has wrongly deleted the addition. No order of Hon ble Rajasthan High Court staying operation of the order of ITAT Jaipur Bench in deleting the addition has been placed before us. Therefore in such circumstances as of now there are no additions in existence as those very additions on the basis of which the Pr. CIT had invoked the provisions of Section 263 of the Act had already stood deleted by the ITAT Coordinate Bench Jaipur. Therefore we allow the present appeal of the assessee.

Summary

Issues Involved:
1. Barred by limitation - Section 263 of the Income Tax Act, 1961
2. Jurisdiction of CIT under Section 263 of the Act
3. Assessment order under Section 143(3) and penalty proceedings under Section 271(1)(c)
4. Deletion of addition by ITAT Jaipur Bench
5. Applicability of Section 263 in the absence of existing additions

Issue 1: Barred by Limitation - Section 263 of the Income Tax Act, 1961
The appellant contended that the order passed under Section 263 by the ld. Pr.CIT was barred by limitation. The argument was based on the premise that the impugned order dated 24-01-2020 was beyond the prescribed time limit. However, the Tribunal did not delve into the merit of this argument due to the subsequent findings regarding the deletion of the additions by the ITAT Coordinate Bench, Jaipur.

Issue 2: Jurisdiction of CIT under Section 263 of the Act
The crux of this issue revolved around the jurisdiction of the ld. Pr.CIT in invoking Section 263 of the Act. The CIT invoked the provisions of Section 263 based on the AO's failure to initiate penalty proceedings under Section 271(1)(c) despite clear findings on the nature of the short-term capital loss claimed by the assessee. The Tribunal noted that the CIT's assumption of jurisdiction was contentious as the ITAT Jaipur Bench had already deleted the additions that formed the basis for invoking Section 263. The Tribunal emphasized that in the absence of existing additions, sustaining the CIT's order under Section 263 was not in accordance with the law.

Issue 3: Assessment Order under Section 143(3) and Penalty Proceedings under Section 271(1)(c)
The assessment under Section 143(3) conducted by the AO led to additions and disallowances under various heads. Subsequently, the CIT found fault with the AO for not initiating penalty proceedings under Section 271(1)(c) despite identifying the bogus nature of the short-term capital loss. This discrepancy prompted the CIT to invoke Section 263, deeming the AO's order prejudicial to the revenue's interest.

Issue 4: Deletion of Addition by ITAT Jaipur Bench
The ITAT Coordinate Bench, Jaipur had previously deleted the additions that were central to the CIT's invocation of Section 263. This deletion played a pivotal role in the Tribunal's decision as it rendered the basis for the CIT's action moot. The Tribunal highlighted that since the additions no longer existed due to the ITAT's decision, upholding the CIT's order under Section 263 was untenable.

Issue 5: Applicability of Section 263 in the Absence of Existing Additions
Given that the ITAT Jaipur Bench had already deleted the additions, the Tribunal concluded that there were no additions in existence at the time of the appeal. This absence of additions, which formed the basis for the CIT's action under Section 263, led the Tribunal to allow the appeal by the assessee. The Tribunal granted liberty to the Department to pursue appropriate proceedings if the ITAT's decision on deletion of additions was altered by the Hon'ble Rajasthan High Court in the future.

This detailed analysis of the judgment provides insights into the intricate legal issues surrounding the invocation of Section 263 of the Income Tax Act, 1961, and the subsequent actions taken by the authorities and the Tribunal in light of the factual and legal complexities of the case.