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2020 (10) TMI 101 - HC - Income TaxRevision u/s 263 - selecting the case for limited scrutiny through CASS to consider two issues namely were substantial increase in capital in a year and the sale consideration of the property in the income tax return was less than the sale consideration of the property reported in AIR - HELD THAT - We find that both the issues, which were the basis for exercise of the powers u/s 263 were, in fact, the issues, which were considered by the AO in the limited scrutiny culminating in the order of assessment u/s 143(3) of the Act dated 23.12.2016. When the PCIT issued the show cause notice dated 13.11.2018 calling upon the assessee to explain with regard to the increase in capital and also conversion of preference shares during the relevant years, the assessee gave a reply dated 02.1.2019. This has been extracted by the Tribunal in paragraph 3.2 of the impugned order. We find the explanation to be cogent and in fact, the factual matrix was appreciated by the Tribunal to hold that the PCIT could not have invoked the revisionary jurisdiction u/s 263 mainly on the ground that substantial increase in capital investment reflected by the assessee in his balance sheet as compared to the preceding year. Entire issue is factual and no substantial question of law flows from the contention raised by the Revenue before us. In the case of Maithan International 2015 (4) TMI 479 - CALCUTTA HIGH COURT decision is not only distinguishable on facts, but also does not render any assistance to the Revenue. In the case on hand, no such finding has been recorded by the PCIT in the order dated 03.1.2019. No substantial question of law arising for consideration in this appeal.
Issues:
1. Appeal against order under Section 260A of the Income Tax Act, 1961 for assessment year 2014-15. 2. Questions of law raised regarding the assessment order and revisional order passed under Section 263 of the Income Tax Act. Analysis: 1. The appeal filed by the Revenue challenged the Tribunal's decision on two substantial questions of law. The first issue was whether the assessment order under Section 143(3) was erroneous and prejudicial to the Revenue's interest due to inadequate inquiry by the Assessing Officer. The second issue was regarding the Tribunal's decision to quash the revisional order under Section 263, despite the Assessing Officer's alleged failure to make proper inquiries and merely accepting the return filed by the assessee. 2. The Tribunal's decision was based on the facts that the original assessee had passed away before the order was issued, with the legal heir pursuing the matter. The assessment for the year 2014-15 was completed after scrutiny, but the PCIT set it aside for fresh assessment under Section 263, alleging errors in verifying the source of increased capital. 3. The Revenue contended that the Tribunal overlooked the distorted financial position of the original assessee and certain undisclosed transactions. They argued that the PCIT explicitly stated the failure of the Assessing Officer to verify the source of increased capital, justifying the order under Section 263. 4. The High Court considered various legal precedents cited by the Revenue, emphasizing the need for an assessment to be both erroneous and prejudicial to the Revenue's interest for invoking Section 263. The Court analyzed the issues considered during limited scrutiny and concluded that the Assessing Officer had addressed the concerns raised in the revisional order. 5. The Court found that the PCIT failed to demonstrate how the assessment order was erroneous and prejudicial to the Revenue, as required by law. The explanation provided by the assessee regarding the increase in capital was deemed satisfactory, and the issues raised were adequately addressed during the assessment process. 6. The Court distinguished the cited legal precedents, noting that they were not applicable to the present case due to factual differences. Ultimately, the Court dismissed the appeal, finding no substantial question of law warranting further consideration, and confirmed the Tribunal's decision. In conclusion, the High Court dismissed the appeal, upholding the Tribunal's decision and finding no substantial question of law in the case.
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