2023 (5) TMI 1298 - AT - Income Tax

Revision u/s 263 against non-Est assessment - As argued statutory notice under section 143(2) of the Act was not issued to the assessee - as per CIT AO has not examined the transactions of share capital and share premium received by the assessee during the year - HELD THAT - As D.R. being unable to place any documentary evidence on record to prove that the assessee was served with the notice under section 143(2) of the Act at the time of carrying out the reassessment proceedings after the issue of notice under section 148, we are inclined to hold that such reassessment proceedings were itself bad-in-law and nonest and the same cannot be a subject matter of the revisionary proceedings and thus on this legal ground itself, the revisionary proceedings under section 263 of the Act are quashed. Whether extensive inquiries and investigation was carried out by AO before adopting one of the possible views, hence, assessment order cannot be said to be erroneous? - There is no dispute to the fact that an extensive inquiry has been conducted by the ld. Assessing Officer regarding the issue of share capital and share premium received by the assessee during the year and the ld. Assessing Officer has made proper application of mind and taken possible view as permissible in law which are duly backed by the documentary evidences filed by the assessee, independent inquiry conducted by the ld. Assessing Officer and settled judicial precedence, therefore, since the issue referred in the show-cause notice under section 263 of the Act has been properly examined by the ld. Assessing Officer, there remains no justification for ld. CIT to assume jurisdiction on the very same issue and, therefore, we quash the impugned revisionary proceedings carried out under section 263 of the Act and allow all the grounds of appeal raised by the assessee.

Summary

Issues Involved:
1. Validity of notice under section 263 of the Income Tax Act, 1961.
2. Jurisdiction of the Commissioner of Income Tax (CIT) under section 263.
3. Adequacy of inquiries conducted by the Assessing Officer (AO).
4. Application of section 68 of the Income Tax Act, 1961.
5. Whether the assessment order was erroneous and prejudicial to the interest of revenue.

Summary:

Issue 1: Validity of Notice under Section 263
The assessee contended that the notice issued under section 263 was without jurisdiction due to the lack of proper notice and opportunity. The Tribunal noted that the reassessment proceedings were bad-in-law and non-est since the statutory notice under section 143(2) was not issued and served upon the assessee. The Tribunal relied on multiple judicial pronouncements to conclude that the absence of notice under section 143(2) renders the assessment order non-est, and thus, revisionary proceedings under section 263 cannot be based on such an invalid assessment.

Issue 2: Jurisdiction of the CIT under Section 263
The Tribunal examined whether the CIT had the jurisdiction to invoke section 263. It was argued that the CIT cannot assume jurisdiction over proceedings that do not exist in the eyes of the law. The Tribunal quashed the revisionary proceedings on the ground that the reassessment order was non-est due to the lack of a valid notice under section 143(2).

Issue 3: Adequacy of Inquiries Conducted by the AO
The assessee argued that extensive inquiries and investigations were conducted by the AO, including issuing notices under section 133(6) and deputing an Inspector to verify the claims. The Tribunal found that the AO had conducted a thorough inquiry and had taken one of the possible views based on the evidence provided. The Tribunal held that jurisdiction under section 263 cannot be assumed merely because the CIT believes that further inquiries should have been conducted.

Issue 4: Application of Section 68 of the Income Tax Act, 1961
The Tribunal noted that the CIT failed to appreciate that the AO had examined the identity and creditworthiness of the shareholders and the genuineness of the transactions. The Tribunal emphasized that the AO had verified the financials, bank statements, and other relevant documents of the subscriber companies. The Tribunal also noted that the CIT's reliance on the amended provisions of section 68, which were not applicable for the assessment year in question, was misplaced.

Issue 5: Whether the Assessment Order was Erroneous and Prejudicial to the Interest of Revenue
The Tribunal concluded that the assessment order was neither erroneous nor prejudicial to the interest of revenue. The AO had adopted a permissible view in law after conducting sufficient inquiries. The Tribunal relied on the principle that when two views are possible, and the AO has taken one view, the order cannot be deemed erroneous merely because the CIT disagrees.

Conclusion:
The Tribunal quashed the revisionary proceedings under section 263 of the Act, allowing all the grounds of appeal raised by the assessee. The appeal filed by the assessee was allowed, and the order was pronounced in the open Court on 1st May, 2023.