2018 (6) TMI 295 - AT - Income Tax

Revision order passed u/s 263 for the order passed by the AO u/s 153A - Deemed dividend addition under Section 2(22)(e) - Held that - The power to revise u/s 263 is where the order passed is erroneous and prejudicial to the interest of the Revenue. In the present case, the reassessment order passed u/s 153A, the same is neither erroneous nor prejudicial to the interest of the Revenue - thus order passed by the Ld. CIT cancelling assessment and directing the AO to frame the assessment afresh is bad in law followed by the decision in case of PR. CIT CENTRAL -1, DELHI VERSUS SHRI MAHESH KUMAR GUPTA 2016 (12) TMI 684 - DELHI HIGH COURT . - Decided in favour of assessee.

Issues Involved:
1. Validity of the order passed under Section 263 of the Income Tax Act, 1961.
2. Limitation under Section 263(2) of the Act.
3. Assessment order being erroneous and prejudicial to the interest of the Revenue.
4. Validity of proceedings under Section 153A in the absence of a search.
5. Jurisdiction of the CIT under Section 263 when issues were already before the AO.
6. Substitution of AO’s opinion by CIT’s opinion under Section 263.
7. Setting aside the matter to the AO without finding an error or prejudice.
8. Taxability of income under different heads (House Property vs. Business Income).

Detailed Analysis:

1. Validity of the order passed under Section 263 of the Income Tax Act, 1961:
The Tribunal examined whether the CIT was within her rights to cancel the reassessment order passed under Section 153A of the Act on the grounds of it being erroneous and prejudicial to the interest of the Revenue. It was found that the reassessment order was neither erroneous nor prejudicial to the interest of the Revenue. The AO had completed the assessment under Section 153A without any incriminating material found during the search. The Tribunal concluded that the CIT could not revise the order under Section 263 in the absence of any incriminating material, reinforcing that what the AO could not do directly, the CIT could not do indirectly.

2. Limitation under Section 263(2) of the Act:
The Tribunal noted that the original assessment order dated 14.11.2008 could not be revised due to the limitation period of two years under Section 263 of the Act. The reassessment order passed under Section 153A was within the permissible time frame, but the CIT’s revision was not justified as it was based on the original assessment which had already lapsed the limitation period.

3. Assessment order being erroneous and prejudicial to the interest of the Revenue:
The Tribunal highlighted that for the CIT to invoke Section 263, the order must be both erroneous and prejudicial to the interest of the Revenue. In this case, the reassessment order under Section 153A was neither erroneous nor prejudicial as it was based on permissible actions by the AO. The AO had already scrutinized the details regarding long-term capital gains and income from house property during the original assessment.

4. Validity of proceedings under Section 153A in the absence of a search:
The assessee argued that no search was carried out on them and no incriminating material was found during the search on the Punj Lloyd Group. The Tribunal agreed, stating that in the absence of any incriminating material, the original assessment could not be altered, and the reassessment under Section 153A was valid as it stood.

5. Jurisdiction of the CIT under Section 263 when issues were already before the AO:
The Tribunal found that the issues raised by the CIT in the notice under Section 263 were already examined by the AO during the original assessment. Hence, the CIT could not assume jurisdiction under Section 263 to revise the reassessment order.

6. Substitution of AO’s opinion by CIT’s opinion under Section 263:
The Tribunal emphasized that Section 263 cannot be used by the CIT to substitute the AO’s opinion with her own. The AO had already made a permissible assessment under Section 153A, and the CIT’s attempt to revise it was unjustified.

7. Setting aside the matter to the AO without finding an error or prejudice:
The Tribunal criticized the CIT for setting aside the matter to the AO to assess afresh without identifying any specific error or prejudice caused by the original assessment order. This action was deemed bad in law.

8. Taxability of income under different heads (House Property vs. Business Income):
The CIT’s contention that income received from M/s Punj Lloyd Ltd. should be taxed under the head ‘House Property’ instead of ‘Business Income’ was rejected. The Tribunal noted that the assessee’s stand had been accepted in other years, and the CIT’s view contradicted the principle of consistency.

Conclusion:
The Tribunal quashed the order passed by the CIT under Section 263, allowing the appeal of the assessee. The reassessment order under Section 153A was upheld, and the CIT’s attempt to revise it was deemed invalid. The Tribunal’s decision was supported by various judicial precedents, including the Jurisdictional Delhi High Court’s ruling in the case of Pr. CIT vs. Sh. Mahesh Kumar Gupta.

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