2020 (12) TMI 1188 - AT - Income Tax

Revision u/s 263 - Unexplained cash investment u/s 69 - Revision of assessment based on order of Settlement Commission - AO treated the cash loan given by the assessee as 'On Money' given to the builder for the purchase of flat and accordingly, AO made the additions - Builder Ahuja Group has accepted the unaccounted nature of the transaction before Settlement Commission - HELD THAT - From the order passed u/s 263 of the Act, we notice that Ld. PCIT is trying to review the assessment based on order of Settlement Commission which was passed on 26.06.18 and coming to a new conclusion based on new information which is different from the view taken by the AO at the time of passing assessment order. As per the provision of section 263(1) Explanation-1(C), the order of the AO which was a special matter of any appeal before Commissioner, powers of the PCIT under this sub-section only to the matter which has not been considered and not decided in the appeal. PCIT has no right to review the order which was subject matter of appeal before Ld. CIT(A) and we notice that the issue which is challenged before Ld. CIT(A) is the same issue in which Ld. PCIT has reviewed u/s 263 PCIT has no power to review the order passed u/s 143(3) and the same order was appealed and adjudicated u/s 254 of the Act. Therefore, we are in agreement with the submission of assessee and we quash the order passed u/s 263 of the Act without going into any merits of the case since Ld. CIT(A) has already considered the merits of this case and passed an order in this regard. Accordingly, the grounds raised by the assessee in this regard are allowed. PCIT has initiated the proceedings u/s 263 of the Act and treated the order passed by AO u/s 153C r.w.s. 143(3) of the Act for the AY 2014-15 and 2015-16. We notice that the issue under consideration is exactly similar to the issue raised in Assessment Year 2016-17. PCIT has reviewed the assessment order which was passed on 11.12.17. It is fact on record that search and seizure operation was initiated on 25.06.15 and assessment orders under consideration for Assessment Year 2014-15 and 2015-16 were assessed u/s 153C and combined order for all the assessments including Assessment Year 2016-17 were passed on the same date 11.12.17. Therefore, in our considered view, AO has considered the facts on records and taken a view on the transactions with M/s. Ahuja Group in Assessment Year 2016-17 and also made the additions in Assessment Year 2016-17 after analyzing the same sets of documents which was reviewed by Ld. PCIT now. Therefore, Ld. PCIT cannot review the order which was already verified and investigated by AO at the time of assessment and the same order which was investigated on coordinated basis, Ld. PCIT cannot review and cannot take a different view. - PCIT has not investigated this issue himself and not offered any cross examination to the assessee - Decided in favour of assessee.

Summary

Issues Involved:
1. Condonation of Delay in Filing Appeal
2. Excess Appeal Fees
3. Erroneous and Prejudicial Order under Section 263
4. Assessment of Unaccounted Transactions
5. Jurisdiction of Principal Commissioner of Income Tax (PCIT)
6. Merger Doctrine and Finality of CIT(A) Order

Detailed Analysis:

1. Condonation of Delay in Filing Appeal
The assessee filed the appeal on 09.06.2020, beyond the due date of 16.05.2020, citing the pandemic situation. The tribunal condoned the delay, noting that the appeal was filed within the extended period allowed by the ordinance/notification up to June 30.

2. Excess Appeal Fees
The assessee paid ?30,000 as appeal fees instead of the required ?500 per appeal under section 253(6)(b) of the Act, totaling ?1,500 for three appeals. The tribunal directed the Registry to refund the excess amount of ?28,500 or adjust it against any outstanding demand.

3. Erroneous and Prejudicial Order under Section 263
The PCIT issued an order under section 263, considering the assessment order for AY 2016-17 erroneous and prejudicial to the interest of revenue. The PCIT based this on the Settlement Commission's findings that M/s. Ahuja Group admitted to unaccounted transactions, including undisclosed cash loans from the assessee. The tribunal noted that the AO made the assessment based on the information available at the time, which did not include the Settlement Commission's subsequent findings.

4. Assessment of Unaccounted Transactions
The AO added ?3,76,50,000 as unexplained cash investment, treating the cash loan given by the assessee as 'On Money' for purchasing a flat. The tribunal observed that the AO's assessment was based on available records and submissions, and the subsequent Settlement Commission's order could not retroactively render the AO's assessment erroneous.

5. Jurisdiction of Principal Commissioner of Income Tax (PCIT)
The tribunal held that the PCIT could not review the AO's order based on subsequent events (Settlement Commission's order). The AO's assessment was made on 11.12.2017, and the PCIT initiated proceedings under section 263 on 11.04.2019, relying on the Settlement Commission's order dated 26.06.2018. The tribunal emphasized that the AO could not have anticipated the Settlement Commission's findings.

6. Merger Doctrine and Finality of CIT(A) Order
The tribunal noted that the CIT(A) had already deleted the addition made by the AO, and the department did not appeal against this order, making it final. Under section 263(1) Explanation-1(C), the PCIT's powers do not extend to matters already decided in appeal. The tribunal quashed the PCIT's order, as it pertained to the same issue adjudicated by the CIT(A).

Conclusion
The tribunal allowed the assessee's appeals, quashing the PCIT's order under section 263 for AYs 2014-15 and 2015-16. The tribunal held that the AO's assessment was not erroneous based on the information available at the time, and subsequent events could not retroactively affect the assessment's validity. The tribunal also addressed procedural issues, such as condonation of delay and refund of excess appeal fees.