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2022 (11) TMI 310 - AT - Income TaxRevision u/s 263 by CIT - Addition u/s 40A(3) - cash payment in violation of section 40A(3) of the Act towards purchase of land from farmers either in the assessment order or in the office note and considered by the AO during the course of scrutiny proceedings is not a valid argument and only an afterthought - HELD THAT - Commissioner may call for and examine the record of any proceeding under this Act, and if he considers that any order passed therein by the Assessing Officer is erroneous, in so far as it is prejudicial to the interest of the revenue. In the instant case, the Commissioner reopened the case u/s 263 of the Act based on the proposal sent by the AO and not on his own volition. We are therefore, of the considered view that reopening is bad in law and hence, we quash the order of the Ld.Pr.CIT. Appeals of the assessees are allowed.
Issues:
- Validity of the order passed by the Ld.Pr.CIT directing the AO to redo the assessment under section 40A(3) of the Income Tax Act for the A.Y. 2012-13. - Jurisdiction of the Ld.Pr.CIT to revise the assessment order passed by the AO under section 263 of the Act. Analysis: Issue 1: Validity of the order passed by the Ld.Pr.CIT The appeals were filed by the assessees against the orders of the Principal Commissioner of Income Tax for the A.Y. 2012-13 and 2014-15. The Ld.Pr.CIT observed that the AO's order was erroneous and prejudicial to the revenue's interest as the cash payments made by the assessee towards the purchase of land violated section 40A(3) of the Act. The Ld.Pr.CIT directed the AO to disallow the entire amount of Rs.1,21,33,000 and tax the same for the A.Y. 2012-13. The assessee argued that the payments were due to business exigencies and were already considered by the AO. However, the Ld.Pr.CIT found the AO's analysis lacking and considered the assessment erroneous. The Tribunal held that the reopening of the case by the Ld.Pr.CIT based on the AO's proposal was not valid in law, quashing the Ld.Pr.CIT's order. Issue 2: Jurisdiction of the Ld.Pr.CIT The assessee raised an additional ground challenging the assumption of jurisdiction by the Ld.AO under section 153C, claiming the order passed under section 263 by the Ld.Pr.CIT was void. The Ld.AR argued that the proposal sent by the AO to revise the order was not legally valid. The Ld.DR supported the Ld.Pr.CIT's order. The Tribunal noted that the Ld.Pr.CIT directed the AO to revise the assessment order based on the AO's proposal. Quoting section 263 of the Act, the Tribunal found that the reopening of the case by the Ld.Pr.CIT was based on the AO's proposal, rendering it invalid in law. Consequently, the Tribunal quashed the Ld.Pr.CIT's order. As the additional ground was allowed, the other grounds raised by the assessee were deemed infructuous and not adjudicated. In conclusion, the Tribunal allowed the appeals of the assessees, pronouncing the order on 19th October 2022.
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