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2022 (11) TMI 976 - AT - Income TaxRevision u/s 263 by CIT - Validity of assessment order passed u/s.143(3) r.w.s 147 - LTCG computation - cost of improvement incurred - AO jurisdiction to assess any other income chargeable to tax which has escaped the assessment - belief of escapement of income in respect of cost of improvement - HELD THAT - The only issue before the AO in the assessment framed u/s.143(3) r.w.s.147 of the Act was bank deposits i.e., holding in savings bank account with HSBC, Chennai wherein total credit transaction in this bank account during the period 01.04.2010 to 31.03.2011 aggregate to Rs.2.29 crores out of which a sum of Rs.26.15 lakhs was cash deposit, was the subject matter of examination. Now, the PCIT want to examine the issue of cost of improvement incurred during the financial year 2004-05 and claimed at Rs.34.34 lakhs. It transpires from the facts of the case that this issue raised by PCIT was never the subject matter of assessment / reassessment framed by AO u/s.143(3) r.w.s. 147 of the Act vide order dated 18.12.2018. Once this is the case, the proposition laid down in the case of Alagendran Finance Ltd., 2007 (7) TMI 304 - SUPREME COURT is clearly applicable. Hence,we quash the revision order passed by PCIT u/s.263 of the Act and allow the appeal of assessee.
Issues:
1. Delay in filing appeal due to Covid-19 pandemic. 2. Revision order passed by PCIT u/s.263 of the Act. 3. Assessment framed by AO u/s.143(3) r.w.s. 147 of the Act. 4. Validity of revision under section 263 of the Act. 5. Examination of cost of improvement in assessment order. 1. Delay in filing appeal due to Covid-19 pandemic: The appeal was delayed by 285 days due to the Covid-19 pandemic. The assessee filed a condonation petition citing the pandemic and lockdown as reasons for the delay. The delay was condoned based on directions from the Hon'ble Supreme Court, allowing the appeal for adjudication. 2. Revision order passed by PCIT u/s.263 of the Act: The PCIT passed a revision order under section 263 of the Act, holding the assessment framed by the AO as erroneous and prejudicial to the interest of Revenue. The PCIT raised concerns about the claimed cost of improvement during the financial year 2004-05, which was not adequately verified by the AO. The PCIT set aside the assessment order and directed the AO to re-examine the issue, leading to the appeal by the assessee before the Tribunal. 3. Assessment framed by AO u/s.143(3) r.w.s. 147 of the Act: The AO framed the assessment under section 143(3) r.w.s. 147 of the Act for the assessment year 2011-12. The assessment primarily focused on the cash deposits made by the assessee in a savings bank account with HSBC, Chennai. The AO disallowed certain expenses and assessed the total income accordingly. 4. Validity of revision under section 263 of the Act: The main issue raised by the assessee was regarding the validity of the revision order passed by the PCIT under section 263 of the Act. The argument centered on the fact that the issue of cost of improvement was not part of the original assessment or reassessment conducted by the AO. The assessee contended that the PCIT's revision could only be based on the reasons for which the reassessment was made, and not on unrelated items like the cost of improvement. 5. Examination of cost of improvement in assessment order: The PCIT wanted to examine the claimed cost of improvement during the financial year 2004-05, which was not the subject matter of the original assessment or reassessment by the AO. The Tribunal, following the decision of the Hon'ble Supreme Court, quashed the revision order passed by the PCIT under section 263 of the Act, as the issue raised was not part of the original assessment or reassessment. In conclusion, the Tribunal allowed the appeal of the assessee, emphasizing that the PCIT's revision order was invalid as it pertained to an issue not considered in the original assessment or reassessment.
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