2018 (1) TMI 79 - AT - Income Tax

Revision u/s 263 - period of limitation - Whether the failure of the AO to give a logical conclusion to the enquiry conducted by him gives power to the CIT to revise such assessment order? - CIT s territorial jurisdiction - order passed u/s 263 in the name of the amalgamating company - Held that - Contention of the assessee that since the AO of the assessee-company was not empowered to examine or make any addition on account of receipt of share capital with or without premium before amendment to section 68 by the Finance Act, 2012 w.e.f. A.Y. 2013-14 and hence the CIT by means of impugned order u/s 263 could not have directed the AO to do so, is unsustainable. The notices u/s 263 were properly served through affixture or otherwise. Further the law does not require the service of notice u/s 263 strictly as per the terms of section 282 of the Act. The only requirement enshrined in the provision is to give an opportunity of hearing to the assessee, which has been complied with in all such cases. Limitation period for passing order is to be counted from the date of passing the order u/s 147 read with sec. 143(3) and not the date of Intimation issued u/s 143(1) of the Act, which is not an order for the purposes of section 263. In all the cases, the orders have been passed within the time limit. The CIT having jurisdiction over the AO who passed order u/s 147 read with section 143(3), has the territorial jurisdiction to pass the order u/s 263 and not other CIT. Addition in the hands of a company can be made u/s 68 in its first year of incorporation. After amalgamation, no order can be passed u/s 263 in the name of the amalgamating company. But, where the intention of the assessee is to defraud the Revenue by either filing returns, after amalgamation, in the old name or otherwise, then the order passed in the old name is valid. Order passed u/s 263 on a non-working day does not become invalid, when the proceedings involving the participation of the assessee were completed on an earlier working day. Order u/s 263 cannot be declared as a nullity for the notice having not been signed by the CIT, when opportunity of hearing was otherwise given by the CIT. Refusal by the Revenue to accept the written submissions of the assessee sent after the conclusion of hearing cannot render the order void ab initio. At any rate, it is an irregularity. Search proceedings do not debar the CIT from revising order u/s passed u/s 147 of the Act. See Subhlakshmi Vanijya Pvt. Ltd. case 2015 (8) TMI 174 - ITAT KOLKATA - Decided against assessee.

Summary

Issues:
1. Proper enquiry into the source of subscription of share capital by the assessee.
2. Validity of CIT's order under Section 263 of the Income Tax Act.
3. Applicability of conclusions drawn in similar cases to the present appeal.
4. Jurisdiction of CIT over the AO who passed the order.
5. Addition in the hands of a company under Section 68 in the first year of incorporation.
6. Validity of order passed in the name of an amalgamating company.
7. Effect of order passed on a non-working day.
8. Validity of order under Section 263 without the notice being signed by the CIT.
9. Refusal to accept written submissions after the conclusion of the hearing.
10. Revision of order under Section 147 despite search proceedings.

Analysis:
1. The appeal was filed by the Assessee against the CIT's order under Section 263 of the Income Tax Act, which directed the Assessing Officer (AO) to conduct a detailed enquiry into the source of subscription of share capital by the Assessee. The CIT found that the AO failed to make proper enquiries regarding the receipt of share capital, leading to the order being set aside for further investigation.

2. The Tribunal examined previous cases involving similar issues and concluded that the CIT had the power to revise the assessment order under Section 263. It was established that inadequate inquiry by the AO could render the assessment order erroneous and prejudicial to the revenue, justifying the CIT's intervention.

3. The Tribunal applied the conclusions drawn from previous cases to the present appeal, dismissing the grounds raised by the Assessee as lacking merit. The decision of the Tribunal in a related case was upheld by the Calcutta High Court, further reinforcing the validity of the CIT's order in the present case.

4. The Tribunal clarified that the CIT with jurisdiction over the AO who passed the order under Section 147 had the authority to issue the order under Section 263, emphasizing the importance of territorial jurisdiction in such matters.

5. It was established that an addition in the hands of a company could be made under Section 68 in its first year of incorporation, highlighting the legal provisions applicable to companies in the initial stages of operation.

6. The Tribunal addressed various scenarios related to the validity of orders passed in specific circumstances, such as in the name of an amalgamating company, on a non-working day, or without the notice being signed by the CIT, providing detailed explanations for each situation.

7. The Tribunal also discussed the implications of search proceedings on the revision of orders under Section 147, emphasizing that search proceedings did not debar the CIT from revising such orders.

8. Ultimately, the Tribunal dismissed the appeal by the Assessee, citing the lack of merit based on the legal provisions and conclusions drawn from previous cases. The decision was pronounced in court on a specified date, concluding the legal proceedings in this matter.