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2022 (6) TMI 331 - AT - Income TaxRevision u/s 263 - period of limitation - survey u/s. 133A was conducted by Investigation Wing and the case was re-assessed u/s. 143(3) r.w.s. 147 - HELD THAT - As stated that the subsequent survey u/s. 133A was conducted by Investigation Wing and the case was re-assessed u/s. 143(3) r.w.s. 147 of the Act dated 22.12.2017. Also argued that the passing order on 27.03.2021, is clearly barred by limitation in the provision u/s. 263(2) of the Act. In support of this contention, the Ld. Representative of the assessee has placed reliance upon the decision in the case of Ashoka Buildcon Ltd. 2010 (4) TMI 152 - BOMBAY HIGH COURT and Western India Turf Club 2021 (10) TMI 673 - ITAT MUMBAI However, on the other hand, the Ld. Representative of the Department has refuted the said contention. The factual position is not in dispute. The original assessment was completed on 21.03.2021 u/s. 143(3) of the Act. However, the case of the assessee was again reopened and the assessment u/s. 143(3) r.w.s. 147 of the Act was completed 22.12.2017. No doubt, original assessment order is liable to be considered to reckon the limitation and accordingly passing the order on 21.03.2021 u/s. 263(2) of the Act is clearly barred by limitation which is beyond two years. Therefore, we set aside the order passed by the Ld. PCIT in question. Accordingly, we decide this issue in favour of the assessee against the revenue.
Issues Involved:
1. Reasonable opportunity of hearing and principles of natural justice. 2. Scope of reassessment and the subject matter of "reason to believe." 3. Time-barred nature of the order under Section 263. 4. Erroneous or prejudicial nature of the assessment order. 5. Allowability of expenditure claimed in the profit and loss account. Issue-wise Detailed Analysis: 1. Reasonable Opportunity of Hearing and Principles of Natural Justice: The assessee contended that the Principal Commissioner of Income Tax (PCIT) passed the order under Section 263 without affording a reasonable opportunity of hearing, violating the principles of natural justice. The Tribunal noted that the PCIT issued the show cause notice on 08-03-2021 and passed the impugned order on 19-03-2021 with undue haste. The assessee raised specific grounds that neither a hearing notice was issued nor any opportunity of being heard was provided. Consequently, the Tribunal found merit in the assessee's contention that the principles of natural justice were violated. 2. Scope of Reassessment and the Subject Matter of "Reason to Believe": The assessee argued that the reassessment was initiated based on information gathered during search proceedings in the case of Bhoomi Group of Companies and a survey on the assessee under Section 133A. The reassessment was completed on 22.12.2017, focusing on the escaped income of Rs. 2,00,50,000/-. The PCIT's order under Section 263 raised issues unrelated to the reassessment's original scope, such as non-deduction of tax on payments and cash deposits. The Tribunal emphasized that the issues raised by the PCIT were neither the subject matter of the reopening nor did they come to the notice of the assessing officer during reassessment proceedings. Citing the Supreme Court's decision in CIT vs. Alagendran Finance Ltd., the Tribunal held that the reassessment proceedings cannot be used to address issues not forming part of the original reasons for reopening. 3. Time-barred Nature of the Order under Section 263: The assessee contended that the PCIT's order dated 27.03.2021 was barred by limitation under Section 263(2) of the Act. The original assessment was completed on 21.03.2013, and the reassessment was completed on 22.12.2017. The Tribunal noted that the limitation period for invoking Section 263 should be reckoned from the original assessment order, not the reassessment order. The Tribunal found support in the decisions of Ashoka Buildcon Ltd. vs. ACIT and Royal Western India Turf Club vs. PCIT, concluding that the PCIT's order was beyond the two-year limitation period and thus barred by limitation. 4. Erroneous or Prejudicial Nature of the Assessment Order: The assessee argued that the PCIT did not demonstrate how the assessment order was erroneous or prejudicial to the interest of the revenue. The Tribunal observed that the PCIT's order lacked specific findings on the erroneous or prejudicial nature of the assessment order. The Tribunal emphasized that the PCIT's direction to the assessing officer to examine the issue without establishing its erroneous or prejudicial nature rendered the order invalid. 5. Allowability of Expenditure Claimed in the Profit and Loss Account: The assessee contended that the expenditure claimed in the profit and loss account was allowable and that the assessment order was neither erroneous nor prejudicial to the interest of the revenue. The Tribunal noted that the PCIT failed to appreciate the facts and did not provide a clear rationale for disallowing the expenditure. The Tribunal held that the PCIT's order lacked merit and was liable to be quashed. Conclusion: The Tribunal set aside the PCIT's order under Section 263, holding it barred by limitation and invalid due to the lack of reasonable opportunity of hearing, failure to establish the erroneous or prejudicial nature of the assessment order, and improper scope of reassessment. The appeal of the assessee was allowed, restoring the original assessment order.
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