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2022 (2) TMI 1349 - AT - Income TaxRevision u/s 263 - difference between administrative and quasi-judicial orders - four orders u/s 263 passed - As per CIT AO did not examine the increased share capital including share premium - merely making an addition to the share capital and premium under section 68 of the act without examination/enquiry is never a pro revenue and judicious approach and therefore the order needs revisions holding that prejudice caused to the revenue administration - HELD THAT - PCIT order has given a clear-cut direction to AO that the assessment proceedings must be initiated at the earliest and to be completed without waiting time barring date. AO must provide sufficient opportunity of being heard to the assessee in order to meet natural justice, equity and fairness - assessment where the addition of ₹ 47 crores was made was passed on 2/3/2015. This order has not been challenged by the assessee before CIT A. Despite this addition, the learned principal Commissioner of income tax revised the order passed by the AO holding that it is erroneous and prejudicial to the interest of the revenue. Reasons provided for invoking the provisions of section 263 of the act are self-evident. Order u/s 263 of the act was passed on 19/10/2016; the AO completed the assessment order in pursuance to that order on 21/12/2016. He issues notices u/s 142 (1) on 15/11/2016. In between this that is almost within a period of one month, the summons were issued u/s 131 of the act of all the parties, notices u/s 133 (6) were also issued to the investor companies. Summons were responded to by the investors and notices u/s 133 (6) were also responded to favourably. AO takes a view that there is no addition u/s 68 could be made in the hence of the assessee with respect to the share capital and premium - Thereafter the AO held by the order passed under section 143 (3) read with section 263 read with section 144 read with section 263 read with section 147 and read with section 143 (3) of the act that the addition of ₹ 47 crores made by the learned assessing officer in the earlier order is not correct. Therefore, in this order he deleted the addition completely. With alarming speed, the assessment was completed at the direction of the learned principal Commissioner of income tax deleting the addition of ₹ 47 crores. It is also rarest of rare case, where PCIT, invoked the provisions of section 263 of the act where the learned assessing officer has made the addition and still it is held by that order that order passed by the AO is erroneous as far as prejudicial to the interest of revenue. This order is subject to 3rd revision holding that the assessment order where the addition is deleted of ₹ 47 crores is erroneous and prejudicial to the interest of revenue, which also came back from ITAT and finally passed on 26/3/2022 as 4th revision order holding that assessment order passed on 21/12/2016 is erroneous and prejudicial to the interest of revenue. On all these orders of revision, all the inquiries were made by the learned assessing officer when assessment order pursuant to the first revision was made on//3/2015 wherein the addition of ₹ 47 crores was made. Therefore, none of the revisionary order states that what is the further enquiry that AO should have made after making the addition. Therefore, the invocation of explanation (2) to section 263 of the act is not proper. It can only be invoked where the order is passed without making enquiries and verification, which should have been made by the learned assessing officer. Whether where there are to views, the provisions of section 263 cannot be invoked. In this case there are four orders under section 263 of the act, three order is completely say that the addition should have been made, one order under section 263 completely direct the learned assessing officer despite making the usual addition of ₹ 47 crores to make further verification and after further verification the AO deleted it. Therefore, it is not the case where there are two judicial views available; it is the case wherein two administrative and quasi-judicial orders under section 263 are available which are taking exactly opposite view. In such circumstances, the order under section 263 challenge before us is not sustainable. In the present case, the AO has taken a view once a making an addition and second time deleting the addition on the same set of facts. Thus, it cannot be said that the view taken by the AO is not sustainable. Thus, the revision is barred in such cases. Decided in favour of assessee.
Issues Involved:
1. Whether the assessment order passed by the AO on 21.12.2016 was erroneous and prejudicial to the interest of revenue. 2. Jurisdiction and authority of the PCIT to review the order of his predecessor. 3. Adequacy of inquiries and verification conducted by the AO. 4. Applicability of clause (a) of explanation 2 of section 263(1) for the assessment year 2010-11. 5. Whether the PCIT followed the binding judgment of the jurisdictional Bombay High Court. 6. Whether the AO's satisfaction regarding the identity, genuineness, and creditworthiness of the investor companies was apparent in the assessment order. 7. The legality of the PCIT's direction for a de novo assessment. Detailed Analysis: 1. Erroneous and Prejudicial to the Interest of Revenue: The PCIT held that the assessment order dated 21.12.2016 was erroneous and prejudicial to the interest of revenue because the AO failed to conduct detailed investigations and verifications regarding the identity, creditworthiness, and genuineness of the shareholders. The PCIT directed the AO to reframe the assessment order de novo after conducting all necessary inquiries and verification. 2. Jurisdiction and Authority of the PCIT: The assessee argued that the PCIT, Mumbai, erred in reviewing the order of his predecessor, PCIT-4, Kolkata, which is beyond his jurisdiction and illegal. The PCIT-1, Mumbai, failed to appreciate that the AO followed the specific direction of PCIT-4, Kolkata, and there was no failure to follow any direction given by PCIT-4, Kolkata. 3. Adequacy of Inquiries and Verification: The assessee contended that the AO carried out detailed inquiries as per law, including obtaining replies to notices under section 133(6), recording statements under section 131, and verifying the identity, genuineness, and creditworthiness of the investor companies. The satisfaction of the AO was apparent in the assessment order itself. The PCIT, however, held that the AO did not conduct proper inquiries and verification. 4. Applicability of Clause (a) of Explanation 2 of Section 263(1): The assessee argued that clause (a) of explanation 2 of section 263(1) is prospective in nature and cannot apply for the assessment year 2010-11. The PCIT, however, relied on this clause to hold the assessment order as erroneous and prejudicial to the interest of revenue. 5. Binding Judgment of the Jurisdictional Bombay High Court: The assessee contended that the PCIT failed to follow the binding judgment of the jurisdictional Bombay High Court quoted before him and did not explain how those judgments were not applicable to the present case. 6. AO's Satisfaction Regarding Investor Companies: The assessee argued that the AO's satisfaction regarding the identity, genuineness, and creditworthiness of the investor companies was apparent in the assessment order. The PCIT, however, held that the AO failed to establish the creditworthiness of the investor companies and did not conduct necessary inquiries. 7. Legality of PCIT's Direction for De Novo Assessment: The PCIT directed the AO to reframe the assessment order de novo after conducting all necessary inquiries and verification. The assessee argued that the PCIT did not make any inquiry himself to demonstrate how the inquiries carried out by the AO were deficient or erroneous. Conclusion: The Tribunal held that the first revision order passed by the PCIT on 11/3/2014 was in order. However, subsequent revisions made the issue debatable with two views even after detailed inquiries. The Tribunal noted that the AO had made necessary inquiries and verifications. The Tribunal quashed the revisionary order passed by the PCIT on 26/3/2022, holding it unsustainable. The appeal of the assessee was allowed.
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