2022 (4) TMI 905 - AT - Income Tax

Revision u/s 263 by CIT - Addition u/s 68 - issue of share capital/premium - whether the requisite jurisdiction necessary to assume revisional jurisdiction is existing in this case before the Pr. CIT rightfully exercised his revisional power? - HELD THAT - In the case in hand, it is other way round i.e. the assessee is pleading before the Ld. Pr. CIT to look into the records at the time when he exercises the revisional jurisdiction u/s 263 of the Act wherein enquiries had been conducted by the AO during the search assessment proceedings in the year 2015. In the instant case, the assessee pleads that the subsequent events/enquiry conducted by the AO in the year 2015 on the issue of share capital and premium, which issue has been found fault by the Ld. Pr. CIT in respect of the assessment order dated 28.03.2011 by passing the impugned order , should be looked in to at the time of exercising revisional jurisdiction is legally tenable and the Ld PCIT ought not to have passed the impugned order without looking in to the subsequent enquiry conducted by the AO on this issue share capital and premium in 2015 and consequently the PCIT erred in ignoring the records which contained the enquiry conducted by AO in the year 2015. And therefore the omission on the part of PCIT to ignore the enquiry carried out by the AO AO, Central Circle in respect of share capital and premium collected by the assessee, vitiates his impugned action of finding fault with the action of AO even in respect of the original assessment on account of lack of enquiry on the part of the earlier AO in respect of share capital/premium. Subsequent events/development also need to taken into consideration while the Ld. Pr. CIT exercised his jurisdiction u/s. 263 of the Act, by applying the same standard in the case in hand the Ld. Pr. CIT ought to have looked into the subsequent enquiries conducted by the AO albeit u/s. 153A of the Act and examined as to whether there was enquiry conducted by the AO in 2015 in respect of the nature and source of the share capital and premium collected by the assessee for AY 2009-10. Here in this case the Ld. Pr. CIT ignored to look into the subsequent action carried out by the AO in the case of assessee s assessment for AY 2009-10 which is an omission on his part which is erroneous/illegal because as per the definition given for records u/s 263 of the Act , even the subsequent assessment proceeding u/s. 153A is deemed to always to have been included in the assessment records for AY 2009-10, which at the time of examination by him u/s 263 of the Act, he was duty bound to examine. And if the Ld PCIT had examined the assessment folder for AY 2009-10, which would have definitely thrown light in respect of enquires conducted by the AO on the issue of share capital/premium. Therefore, the Ld. Pr. CIT erred in not looking into the records pertaining to the 153A proceeding (post-search) and thereby he ignored the relevant material (enquiry conducted by AO, Central Circle) to hold the action of the AO in original assessment to be erroneous as well as prejudicial to the interest of revenue - the order of Ld. Pr. CIT cannot be sustained and therefore, quashed. Appeal of assessee allowed.

Summary

Issues Involved:
1. Jurisdiction under Section 263 of the Income-tax Act, 1961.
2. Validity of the original assessment order dated 28.03.2011.
3. Consideration of subsequent reassessment order dated 23.03.2015.
4. Adequacy of the enquiry conducted by the Assessing Officer (AO).

Issue-wise Detailed Analysis:

1. Jurisdiction under Section 263 of the Income-tax Act, 1961:
The main grievance of the assessee was the invocation of jurisdiction under Section 263 by the Principal Commissioner of Income Tax (Pr. CIT) without satisfying the essential conditions precedent, i.e., without validly holding the order of the AO to be erroneous as well as prejudicial to the interest of the revenue. The Tribunal referred to the judicial precedent set by the Hon'ble Supreme Court in Malabar Industries Ltd. vs. CIT, which states that twin conditions need to be satisfied for exercising revisional jurisdiction: the order must be erroneous and prejudicial to the interest of the revenue.

2. Validity of the Original Assessment Order dated 28.03.2011:
The original assessment order dated 28.03.2011 accepted the return of income at ?68,410/-. The Pr. CIT canceled this order on 28.03.2013, directing the AO to reassess the share capital and premium collected by the assessee. The Tribunal had previously set aside the Pr. CIT's order and directed a fresh order after hearing the assessee. The Pr. CIT, in the impugned order dated 30.03.2021, held that the AO's order was erroneous and prejudicial to the revenue due to a lack of proper enquiry into the share capital and premium.

3. Consideration of Subsequent Reassessment Order dated 23.03.2015:
The Tribunal emphasized that the Pr. CIT should have considered the subsequent reassessment order dated 23.03.2015, where the AO, Central Circle, had enquired into the share capital and premium collected by the assessee and found no adverse view. The Tribunal cited the definition of 'records' under Section 263, which includes all records relating to any proceeding under the Act available at the time of examination by the Pr. CIT. The Tribunal referred to the Hon'ble Supreme Court's decision in Shreeman Junathesware Packing Products & Camphor Works, which held that the Pr. CIT must consider all records available at the time of examination, including subsequent developments.

4. Adequacy of the Enquiry Conducted by the Assessing Officer (AO):
The Tribunal found that the AO, during the reassessment proceedings under Section 153A, had issued notices under Section 133(6) to all twenty-five share subscribers and received replies, thereby conducting a thorough enquiry into the share capital and premium. The Tribunal held that the AO's enquiry during the reassessment proceedings should have been considered by the Pr. CIT while exercising jurisdiction under Section 263. The Tribunal concluded that the Pr. CIT's failure to consider the subsequent enquiry conducted by the AO was an error, rendering the Pr. CIT's order unsustainable.

Conclusion:
The Tribunal quashed the Pr. CIT's order dated 30.03.2021, holding that the Pr. CIT erred in not considering the subsequent reassessment proceedings and the enquiry conducted by the AO regarding the share capital and premium. The appeal of the assessee was allowed.