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2020 (12) TMI 860 - AT - Income TaxRevision u/s 263 - CIT setting aside the assessment order passed u/s 147/148 - reasons recorded were not valid or was not in accordance with - As per CIT AO has not verified the share premium of ₹ 20 Lakhs from Euphoria Capital Private Limited HELD THAT - Once, the very basis for reason to believe on the basis of which assessment was reopened does not exist; and the AO has duly accepted after verification that the addition cannot be made and information was incorrect, then, it was incumbent upon the Ld. Pr. CIT to point out as to what was the error in the assessment order. Once, the AO has not made any addition in respect of alleged accommodation entry from M/s Euphoria Capital Private Limited, then there is no scope of expanding the reasons recorded and travel beyond the reasons recorded on which Assessing Officer had acquired jurisdiction for reopening u/s 147 by the Ld. Pr. CIT in his revisionary jurisdiction u/s 263. Here the Ld. Pr. CIT had tried to presume the error in the assessment order which at the face of the record is not there; or there is anything to perceive that Assessing Officer has not examined the information which was the basis for reason to believe for reopening the case. Here in this case, it cannot be held that the AO has not applied his mind on the information received or has not carried out any enquiry or verification. Nowhere, the Ld. Pr. CIT has held as to how the order of the AO is erroneous and prejudicial to the interest of the Revenue. The Ld. Pr. CIT has to establish from the records and has to give reasons as to why the order of the AO is erroneous and prejudicial to the interest of the Revenue to cancel or set-aside the assessment order. We find that nowhere the Ld. Pr. CIT has pointed out any error as to how the order of the AO is erroneous and since one of the condition is lacking, therefore, neither in law nor on facts, he can set aside or cancel the assessment order and direct to pass fresh assessment order. In view of our aforesaid reasoning, the impugned order u/s 263 passed by the Ld. Pr. CIT is quashed. - Decided in favour of assessee.
Issues Involved:
1. Validity of the reopening of assessment under Section 147/148 of the Income Tax Act. 2. Legitimacy of the revisionary jurisdiction exercised by the Principal Commissioner of Income Tax (Pr. CIT) under Section 263 of the Income Tax Act. 3. Examination of whether the Assessing Officer (AO) conducted proper verification and inquiry. Detailed Analysis: 1. Validity of the Reopening of Assessment under Section 147/148: The case was reopened based on information from the Investigation Wing indicating that the assessee received accommodation entries of ?20,00,000 from M/s Euphoria Capital Private Limited. The assessee contested this, stating that no such transactions occurred. The AO examined the bank statements and books of accounts and found no such entries from M/s Euphoria Capital Private Limited, only identifying a single credit of ?10,00,000 from M/s Gannon Dunkerly and Company Ltd. Consequently, the AO accepted the return of income, concluding that the basis for reopening the assessment was incorrect. 2. Legitimacy of the Revisionary Jurisdiction Exercised by the Pr. CIT under Section 263: The Pr. CIT invoked Section 263, asserting that the AO's order was erroneous and prejudicial to the interests of the Revenue due to inadequate verification of the share premium. The Pr. CIT directed the AO to pass a fresh assessment order. However, the Tribunal found that the AO had already verified the relevant details and concluded that the alleged accommodation entry did not exist. The Tribunal referenced the jurisdictional High Court's decision in CIT vs Software Consultants, emphasizing that if the AO did not make an addition based on the reasons for reopening, the order could not be deemed erroneous, and thus, Section 263 could not be invoked. 3. Examination of Whether the AO Conducted Proper Verification and Inquiry: The Tribunal noted that the AO had duly examined the bank statements and books of accounts, confirming no receipt of ?20,00,000 from M/s Euphoria Capital Private Limited. The AO's conclusion was based on factual verification, and no error was found in the AO's assessment order. The Tribunal highlighted that for Section 263 to be invoked, the order must be both erroneous and prejudicial to the Revenue's interests. Since the AO's order was neither erroneous nor prejudicial, the Pr. CIT's invocation of Section 263 was invalid. Conclusion: The Tribunal quashed the Pr. CIT's order under Section 263, affirming that the AO had conducted a thorough verification and that the reopening of the assessment was based on incorrect information. The appeal of the assessee was allowed, and the Tribunal concluded that the Pr. CIT had no grounds to revise the AO's order. Order Pronouncement: The order was pronounced in the open Court on 11th December 2020, allowing the appeal of the assessee.
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