2022 (3) TMI 607 - AT - Income Tax

Revision u/s 263 by CIT - Reopening of assessment twice - AO issued notice u/s 148 based on the reason that he received information from Investigation Wing that the ass essee has received accommodation entry - Second re-assessment order has been interdicted by the impugned order of the Ld. Pr. CIT u/s. 263 - HELD THAT - Second reopening was made by the AO based on the same reasons recorded for reopening the assessment of assessee for the first time (i.e. ₹ 50 lacs has escaped assessment); and since the AO in the first round has reopened the assessment of assessee and enquired about escapement of ₹ 50 lacs which was supposed to have escaped assessment and finally has made addition of only ₹ 25 lacs, the necessary corollary is that AO has accepted/satisfied with the balance of ₹ 25 lakhs out of ₹ 50 Lakhs which was supposed to have escaped assessment for which the AO reopened the assessment in the first round. Thereafter when the second AO reopened on the same issue (i.e. again on the issue of escapement of ₹ 50 Lakhs) which was the precise reason for reopening the assessment in the first round, and the AO in the second round rightly have not made any addition because it is trite law that the second AO in the second round cannot sit in review in respect of the action of AO in the first round on the same issue i.e. AO order dated 29.01.2016 passed u/s. 147/143(3) of the Act on the same set of facts - action of the AO dated 22.06.2018 not to make any addition is valid in law and, therefore, the Ld. Pr. CIT by the impugned order could not have held the AO s order dated 22.06.2018 (second reassessment order) to be erroneous as well as prejudicial to the interest of the revenue because the order of AO (dated 22.06.2018) is in line with well settled principle of law that AO does not enjoy the power of review. Decided in favour of assessee.

Summary

Issues:
1. Delay in filing the appeal and condonation petition due to Covid-19 pandemic.
2. Validity of exercising revisional jurisdiction u/s. 263 of the Income-tax Act.
3. Reopening of assessment based on accommodation entries and subsequent additions.
4. Jurisdiction of Principal Commissioner of Income Tax (PCIT) to pass the impugned order.

Analysis:
1. The appeal was time-barred by 143 days, but the assessee filed a condonation petition citing the Covid-19 pandemic as the main cause of delay. The Appellate Tribunal decided to condone the delay and admit the appeal for hearing based on the extension of limitation granted by the Hon'ble Supreme Court due to the pandemic.

2. The main grievance of the assessee was against the action of the Ld. Pr. CIT in exercising revisional jurisdiction under section 263 without validly holding that the Assessing Officer's order was both erroneous and prejudicial to the revenue's interest. The Tribunal examined the facts and concluded that the Ld. Pr. CIT did not meet the conditions precedent for invoking section 263, thereby ruling in favor of the assessee.

3. The case involved the reassessment of the assessee based on information about accommodation entries totaling ?50 lakhs. The Assessing Officer (AO) reopened the assessment twice, making additions of ?25 lakhs each time. The Tribunal observed that the second reopening by the AO on the same grounds as the first reassessment, where only ?25 lakhs was added, did not warrant further additions. The AO's decision not to add any amount in the second reassessment was upheld as valid, as the AO cannot review his own decision on the same issue.

4. The Tribunal analyzed the actions of the AO in the reassessment process and found that the AO's second reassessment order, where no addition was made, was in accordance with established legal principles. Therefore, the Ld. Pr. CIT could not have deemed the AO's order erroneous and prejudicial to the revenue's interest. The Tribunal ruled in favor of the assessee, allowing the appeal.

In conclusion, the Appellate Tribunal allowed the appeal of the assessee, highlighting the importance of adherence to legal procedures and principles in exercising revisional jurisdiction and reassessment processes under the Income-tax Act.