2022 (7) TMI 116 - AT - Income Tax

Revision u/s 263 - reopening of assessment u/s 147 - period of limitation - HELD THAT - As the issue on which the ld. PCIT revised and set aside the reassessment order passed u/s 143(3) r.w.s. 147 comprised of issues of current liability, withdrawal against debit capital account and not charging of service tax in the profit and loss account which were undoubted not the subject matter of reassessment proceedings. Therefore, the period of limitation has to run from the date of assessment as framed under section 143(3) but there was no assessment u/s 143(3) - We have also examined the possibility of treating the intimation passed u/s 143(1) of the Act as assessment order and limitation can be reckoned from that order. Even in that scenario our conclusion would be same . Therefore, in view of this, we are inclined to hold that the revisionary jurisdiction exercised by the ld. PCIT is wrong and thus cannot be sustained as it hopelessly barred by limitation. Even otherwise on merits, the issues raised by the ld PCIT in the revisionary proceedings which finally resulted into the reassessment order dated 18.12.2013 being revised and set aside in no way can be said to be issues rendering the assessment order to be erroneous - the issues raked up and proposed by the ld PCIT in the order passed u/s 263 of the Act were not such which could render the assessment as erroneous. The main purpose of exercising the revisionary jurisdiction u/s 263 of the Act was non examination of current liabilities Rs. 55,10,278/-, withdrawals of Rs. 33,09,490/- against debit capital balance and not charging of service tax to the profit and loss account nor showing it as payable in balance sheet. We observe from the audited balance sheet that substantial part of the current liability is coming from the preceding year and non examination of the same could render the assessment as erroneous is not understandable. Similarly the withdrawals against negative capital balance can render the assessment as erroneous is also beyond our understanding. Lastly the non charging of service tax and not showing in the balance sheet can influence the correctness of the order. In our considered opinion these issues are not such which can render the assessment erroneous. Similarly what prejudice is caused to the revenue is also not clear from the order of the ld PCIT. In order to revise the order the twin conditions have to be satisfied i.e. the order has to be erroneous and secondly it must be prejudicial to the interest of the revenue. This ratio has been laid down in the case of Malabar Industrial Co. Ltd Vs CIT ( 2000 (2) TMI 10 - SUPREME COURT - But in the instant case before us these conditions are not satisfied. - Decided in favour of assessee.

Summary

Issues Involved:
1. Delay in filing the appeal.
2. Validity of revisionary proceedings under Section 263 of the Income Tax Act.
3. Barred by limitation.
4. Erroneous and prejudicial to the interest of the revenue.

Detailed Analysis:

1. Delay in Filing the Appeal:
The appeal was delayed by 1769 days. The assessee argued that the delay was due to the failure of their chartered accountant to file the appeal on time and the assessee's own health issues following a serious accident. The assessee's counsel cited multiple judicial decisions to support the condonation of the delay. The Tribunal noted the reasons provided, including the accident and the failure of the counsel, and decided to condone the delay in the interest of justice and fair play, allowing the appeal to be heard on its merits.

2. Validity of Revisionary Proceedings under Section 263:
The assessee challenged the revisionary proceedings initiated by the Principal Commissioner of Income Tax (PCIT) under Section 263 of the Income Tax Act, arguing that the assessment was neither erroneous nor prejudicial to the interest of the revenue. The PCIT had observed that the Assessing Officer (AO) failed to conduct proper inquiries regarding certain items in the balance sheet and profit and loss account. The Tribunal examined the reasons for the revisionary proceedings and found that the AO had not examined the current liabilities, withdrawals against negative capital balance, and non-charging of service tax in the profit and loss account.

3. Barred by Limitation:
The assessee contended that the revisionary order was barred by limitation as per Section 263(2) of the Act. The original return was processed under Section 143(1), and the reassessment was carried out under Section 147. The Tribunal noted that the issues raised by the PCIT were not part of the reassessment proceedings and therefore, the limitation period should commence from the original assessment date. The Tribunal relied on the Supreme Court decision in CIT vs. Alagendran Finance Ltd. and the Bombay High Court decision in CIT vs. ICICI Bank Limited, which held that the limitation period runs from the date of the original assessment if the issues were not part of the reassessment.

4. Erroneous and Prejudicial to the Interest of the Revenue:
The Tribunal examined whether the reassessment order was erroneous and prejudicial to the interest of the revenue. It was noted that the issues raised by the PCIT, such as current liabilities, withdrawals against negative capital balance, and non-charging of service tax, did not render the assessment erroneous. The Tribunal emphasized that for revisionary jurisdiction to be valid, both conditions of the order being erroneous and prejudicial to the revenue must be satisfied concurrently. The Tribunal concluded that these conditions were not met in this case.

Conclusion:
The Tribunal quashed the revisionary proceedings and the order passed under Section 263 of the Act, allowing the appeal of the assessee. The revisionary jurisdiction exercised by the PCIT was found to be barred by limitation and not justified on merits. The Tribunal emphasized the importance of substantial justice over technical considerations, aligning with the principles laid down by higher judicial authorities.