2019 (9) TMI 855 - AT - Income Tax

Revision u/s.263 - although the assessment order dated 25.3.2015 was passed u/s.143(3) but there is no enquiry by the Assessing officer on the issue of interest of bank deposits which were picked up by Pr.CIT for invoking the jurisdiction of section 263 - HELD THAT - Tribunal has taken a view on the issue of interest earned by the assessee on short term fixed deposit in favour of the assessee but this order of the Tribunal was not in existence when the ld Pr. CIT invoked powers u/s.263 of the Act and passed the impugned order revising the assessment. Subsequent Tribunal order defines favours the assessee s stand on the issue of interest earned by the assessee from short term fixed deposit but while evaluating the legality of the revisional order passed by Pr CIT u/s.263 the Tribunal order (supra) cannot be taken into consideration as has been passed anti-dated. As brought to our notice by ld A.R. that the Assessing Officer has made addition in the reassessment order passed in pursuance to the impugned order of Pr. CIT u/s.263 of the Act, wherein, addition has been made in the hands of the assessee. Ld A.R. informed the bench that the appeal of the assessee is pending before the CIT(A). We are of the view that Pr. CIT has proceeded to invoke the powers available to him u/s.263 of the Act and after perusal of the assessment records, he found that there was no enquiry by the Assessing Officer on the issue of interest earned by the assessee on short term fixed deposit with the bank. Thereafter, ld Pr. CIT issued notice u/s.263 of the Act and after considering the reply of the assessee and after allowing opportunity of being heard to the assessee, passed the impugned order by holding that the Assessing Officer has failed to bring to tax the interest received as income of the assessee from other sources and, thus, the assessment order is set aside to the file of the AO on the above issue with a direction to examine same afresh and do the assessment denovo. These findings and observations of Pr. CIT in the order dated 22.2.2017 are quite correct and in accordance with the mandate of section 263 of the Act as there was no enquiry by the AO on the issue of interest earned by the assessee on short term fixed deposit with the bank. Therefore, Pr. CIT was right in holding that the order of the AO is erroneous and prejudicial to the interest of the revenue. The cognizance of the subsequent order dated 31.8.2018 of the Tribunal (supra) was not practically possible as this order was not in existence when Pr. CIT passed the impugned revisional order. Pr. CIT was right in revising the assessment order passed u/s.143(3) of the Act and directing the AO to pass the denovo assessment order on the said issue. - Decided against assessee

Summary

Issues:
1. Challenge to order of Pr. CIT under section 263 of the Act.
2. Jurisdiction of Pr. CIT to revise assessment order.
3. Treatment of interest accrued on share capital.
4. Consideration of Tribunal's order in earlier and subsequent assessment years.
5. Lack of enquiry by Assessing Officer on interest on bank deposits.
6. Legality of revisional order by Pr. CIT.
7. Assessment records and examination by Pr. CIT.
8. Direction to AO for denovo assessment.
9. Consideration of subsequent Tribunal order.
10. Merits of the issue left open for CIT(A) to decide.

Detailed Analysis:

1. The appeal was filed by the assessee against the order of the Pr. CIT under section 263 of the Act, challenging the jurisdiction of the Pr. CIT to revise the assessment order for the assessment year 2012-13.

2. The assessee contended that the order of the Pr. CIT was arbitrary, illegal, and without jurisdiction. The assessee argued that the completed assessment cannot be revised based on the decision of the Hon'ble Supreme Court and that the interest accrued on share capital was capital receipt, not revenue receipt.

3. The Assessing Officer completed the assessment without enquiring into the issue of interest on bank deposits, which was later picked up by the Pr. CIT for revision under section 263 of the Act.

4. The Tribunal's order in earlier and subsequent assessment years favored the assessee's position on the interest earned on short term fixed deposits, which was not considered by the Pr. CIT while passing the revisional order.

5. The Pr. CIT found that the Assessing Officer failed to bring to tax the interest received by the assessee as income from other sources, leading to the order being set aside for denovo assessment.

6. The Tribunal observed that while the subsequent order favored the assessee, it could not be considered in the revisional order as it was passed later.

7. The Pr. CIT's revisional order directing the AO to conduct denovo assessment on the issue of interest earned on short term fixed deposits was held to be correct based on the lack of enquiry by the Assessing Officer.

8. The Tribunal did not express any opinion on the merits of the issue, leaving it open for the CIT(A) to decide while considering the facts and circumstances of the case.

9. Ultimately, the appeal of the assessee was dismissed, with the Tribunal upholding the Pr. CIT's revisional order for denovo assessment on the issue of interest earned on short term fixed deposits.

This detailed analysis covers the various issues raised in the appeal and the Tribunal's decision regarding the revisional powers of the Pr. CIT under section 263 of the Act.