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2024 (2) TMI 1149 - AT - Income TaxRevision u/s 263 by CIT against reopening of assessment - AO had not made enquiries on capital gains, investment in time deposits with the Axis Bank and deduction u/s 54 thereby making his order erroneous and prejudicial to the interest of the Revenue - HELD THAT - We find once the Ld. AO having recorded the reasons for reopening the assessment and having formed a belief that income of the assessee had escaped assessment, had not made any addition in the reassessment proceedings in respect of issues that are subject matter of reopening. Hence, the very basis of formation of belief for the Ld. AO vanishes. Hence, the Ld. AO could not have framed any reassessment per se. Logically the Ld. AO should have simply dropped the initiation of reassessment proceedings instead of passing a separate reassessment order. Once, the reassessment order per se framed by the Ld. AO is not sustainable in the eyes of law, any revision order passed thereon u/s 263 seeking to revise such unsustainable order cannot be accepted in the eyes of law and consequential revision order also passed u/s 263 of the Act deserves to be quashed. Our view is further fortified by the decision of Sh. Pramajit Singh vs. PCIT 2023 (12) TMI 1292 - ITAT DELHI wherein the Tribunal placed reliance on the decision of Software Consultants 2012 (2) TMI 18 - DELHI HIGH COURT AO did not make any addition for the reasons recorded at the time of issue of notice under Section 148 of the Act. This position is not disputed and disturbed by the Commissioner of Income Tax in his order under Section 263 of the Act. Sequitur is that the Assessing Officer could not have made an addition on account of share application money in the assessment proceedings under Section 147/148. Accordingly, the assessment order is not erroneous. Thus, the Commissioner of Income Tax could not have exercised jurisdiction under Section 263 of the Act - Appeal filed by the assessee is allowed.
Issues Involved:
1. Validity of the assumption of jurisdiction under Section 263 of the Income Tax Act, 1961 by the Principal Commissioner of Income Tax (Pr. CIT). 2. Whether the reassessment order dated 16-11-2018 was erroneous and prejudicial to the interest of the Revenue. 3. Compliance with principles of natural justice in the reassessment proceedings. Summary: Issue 1: Validity of Assumption of Jurisdiction under Section 263 The core issue was whether the Pr. CIT validly assumed revision jurisdiction under Section 263 of the Income Tax Act, 1961. The Tribunal noted that the Assessing Officer (AO) had recorded reasons for reopening the assessment but did not make any additions in the reassessment order dated 16-11-2018. The Tribunal observed, "the very basis of formation of belief for the Ld. AO vanishes," and thus, the reassessment order itself was not sustainable. Consequently, any revision order passed under Section 263 to revise such an unsustainable order was also deemed invalid. This view was supported by the Delhi Tribunal's decision in the case of Sh. Pramajit Singh vs. PCIT and the Hon'ble Jurisdictional High Court's decision in CIT vs. Software Consultants. Issue 2: Erroneous and Prejudicial to the Interest of Revenue The Pr. CIT sought to revise the reassessment on the grounds that the AO had not made adequate inquiries regarding capital gains, investment in time deposits, and deduction under Section 54. However, the Tribunal found that since no additions were made on the issues for which the assessment was reopened, the AO could not have framed a valid reassessment. Thus, the reassessment order was not erroneous or prejudicial to the interest of the Revenue. Issue 3: Compliance with Principles of Natural Justice The Tribunal noted that the Pr. CIT's actions were in violation of the principles of natural justice, as the reassessment proceedings did not provide the assessee with an adequate opportunity to be heard. Conclusion: The Tribunal quashed the revision order passed under Section 263, holding that the Pr. CIT erred in assuming jurisdiction. Since the revision order was quashed on legal grounds, other factual and legal arguments were left open and not adjudicated. The appeal filed by the assessee was allowed. Order Pronouncement: The order was pronounced in the open court on 20th February, 2024.
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