2022 (5) TMI 1150 - AT - Income Tax

Revision u/s 263 - CIT setting aside assessment framed u/s 143(3) read with Section 147 for the reason that AO has failed to examined the identity, creditworthiness and genuineness of the transactions of share capital /share premium - HELD THAT - The revisionary jurisdiction is not available to the PCIT merely on the ground that AO sought reply from the assessee during assessment proceedings which furnished by the assessee with evidences and are available in the assessment records however it did not find an elaborate discussion or reference in the assessment order. Similarly the powers of revision u/s 263 of the Act cannot be exercised arbitrarily in order to make roving enquiries and initiate fresh enquiries . In our considered view , the jurisdiction u/s 263 can be exercised to revise the assessments where no enquiry at all has been conducted by the AO which is a case of lack of enquiry but not in a case where the AO has conducted an enquiry which in the opinion of PCIT is inadequate /insufficient without showing as to how the order framed by the AO after appreciating the evidences filed by the assessee is contrary to facts or not in accordance with law. The case of the assessee finds supports on all these propositions from several decisions by the Apex Courts and other juridical forums as cited before us during the course of hearing namely Malabar Industrial Co. 1991 (10) TMI 26 - KERALA HIGH COURT , CIT vs. Max India Ltd. 2007 (11) TMI 12 - SUPREME COURT , CIT vs. Gabriel India Ltd 1993 (4) TMI 55 - BOMBAY HIGH COURT . Thus we hold that the revisionary jurisdiction has not been validly exercised by the ld PCIT. Accordingly we quash the revisionary proceedings initiated u/s 263 of the Act and the consequent order passed u/s 263 of the Act. The appeal of the assessee is allowed.

Summary

Issues Involved:
1. Wrong assumption of jurisdiction under Section 263 of the Income Tax Act, 1961.
2. Examination of identity, creditworthiness, and genuineness of transactions related to share premium.
3. Validity of the assessment order under Section 143(3) read with Section 147 of the Act.
4. Adequacy of the Assessing Officer's (AO) inquiry during the assessment proceedings.

Issue-wise Detailed Analysis:

1. Wrong Assumption of Jurisdiction under Section 263 of the Income Tax Act, 1961:
The assessee contested the Principal Commissioner of Income Tax's (PCIT) assumption of jurisdiction under Section 263, arguing that the AO had already examined the relevant transactions. The tribunal noted that for jurisdiction under Section 263 to be valid, the order must be both erroneous and prejudicial to the interests of the revenue. The tribunal found that the AO had conducted an inquiry and accepted the assessee's submissions, thereby taking a possible view. Hence, the PCIT's assumption of jurisdiction was deemed invalid.

2. Examination of Identity, Creditworthiness, and Genuineness of Transactions Related to Share Premium:
The PCIT revised the assessment on the grounds that the AO failed to examine the identity, creditworthiness, and genuineness of transactions related to a share premium of Rs. 86,70,000/-. However, the tribunal found that the assessee had not received any share capital/premium during the relevant financial year. Instead, the transaction involved the sale of shares to M/s SS Securities. The tribunal concluded that the AO had examined these transactions during the assessment proceedings, and the PCIT had wrongly assumed facts.

3. Validity of the Assessment Order under Section 143(3) read with Section 147 of the Act:
The assessment was reopened under Section 147 to examine the transaction of Rs. 86,70,000/- based on information from the DDIT(Inv). The tribunal found that the AO had issued statutory notices and received detailed responses from the assessee, including computation of income, audited accounts, and bank statements. Thus, the AO's order was not erroneous or prejudicial to the revenue, and the PCIT's revision was not justified.

4. Adequacy of the Assessing Officer's (AO) Inquiry During the Assessment Proceedings:
The tribunal emphasized that the AO had conducted a proper inquiry by calling for details and receiving comprehensive responses from the assessee. The PCIT's revisionary jurisdiction does not extend to cases where the AO has conducted an inquiry, even if the PCIT believes it to be inadequate. The tribunal cited several judicial precedents to support this view, including decisions from the Supreme Court and High Courts, which confirm that jurisdiction under Section 263 cannot be exercised merely because the PCIT disagrees with the AO's view or finds the inquiry inadequate.

Conclusion:
The tribunal quashed the revisionary proceedings initiated under Section 263 and the consequent order passed by the PCIT. The appeal of the assessee was allowed, and the tribunal held that the AO had conducted a sufficient inquiry and taken a possible view, making the PCIT's revision unjustified. The order was pronounced in the open court on 13th May 2022.