2022 (7) TMI 936 - AT - Income Tax

Revision u/s 263 - validity of assessment as completed u/s 143 read with section 153A - HELD THAT - We find that assessment order dated 30.3.2016 passed u/s.153A is confined only to the Returned Income, in other words, original assessment order is reiterated. As against this assessment order, the Ld. Pr. CIT could not initiate revision proceedings under section 263 of the Act on the ground that order passed by the AO is erroneous and prejudicial to the interest of the Revenue since the basic assessment itself is invalid in law. As we find that assessment order dated 30.3.2016 passed u/s. 153A is confined only to the Returned Income, in other words, original assessment order is reiterated. As against this assessment order, the Ld. Pr. CIT could not initiate revision proceedings under section 263 of the Act on the ground that order passed by the AO is erroneous and prejudicial to the interest of the Revenue since the basic assessment itself is invalid in law. Thus we hold that the Revision Order passed as against the invalid assessment order is nullity in law. Revision proceeding based on the Internal Audit Party report - As it is settled Principle of law by the Three Judges Bench judgment of the Hon'ble Supreme Court in the case of Sirpur Paper Mill Ltd. 1970 (4) TMI 4 - SUPREME COURT that revision made by the Commissioner simply following direction of the Board, which may control exercise of power of officers of department in administrative matters, but not in quasi-judicial matters. In case of judicial matters, the Commissioner should apply his mind and initiate proceedings in accordance with law and not merely carry out directions of the Board. Thus, any order passed pursuant to the directions of the Board is liable to be set aside as Commissioner has not applied his independent judgments in invoking revision proceedings. Respectfully following the above judgments of jurisdictional High Court and judgment of Hon'ble Supreme Court cited (supra) we hold that revision order passed by the Pr. CIT Central for the asst. year 2009-10 is not in accordance with law and the same is hereby quashed. We further found the Explanation (2)(a) to section 263(1) of the Act has been inserted w.e.f. 01-06-2015 only. The Ld. Pr. CIT is legally not correct in invoking this provision and therefore the initiation of Revision Proceedings itself is invalid in law. For all the above reasons, we find that Revision Order passed by the Pr. CIT is not in accordance with law, and therefore, the same is hereby quashed. Cash on sale of land - Receipt by assessee as legal heir - Asst. Year 2008-09 - As on the date of execution of the sale deed, Smt. Shushilaben H. Thakkar was not alive. Therefore, the said amount of Rs. 24,46,500/- received by the assessee, on behalf of his wife can only be taxed in the hands of the assessee in his capacity as legal heir . It cannot be taxed in the hands of the assessee in his individual capacity. Both the status provided in the section 2(31) of the Act are distinct and separate. Therefore, the Ld. DCIT submitted that objection raised by the audit party was not acceptable. The income of legal heir cannot be assessed in the hands of individual and hence requested to drop Audit Objection. In the same line, Ld. JCIT vide his letter dated 14.3.2018 submitted before the Ld. Pr. CIT(Central) to drop further proceedings. However, as it can be seen from the show cause notice, for the very same reason, Pr. CIT has invoked revision proceedings without applying his mind, but borrowed reasons from Revenue Audit Party, which is bad in law. Thus the Ld. Pr. CIT erred in invoking proceedings under section 263 with barrowed reasons which is against the provision of law and liable to be quashed. Assessee appeal allowed.

Summary

Issues Involved:
1. Validity of the assessment made under section 153A without incriminating material.
2. Legality of the revision of assessment based on the Tax Evasion Petition (TEP) and Revenue Audit Team's recommendation.
3. Applicability of Explanation 2(a) to section 263(1) of the Income Tax Act, 1961.

Issue-Wise Detailed Analysis:

1. Validity of the Assessment Made Under Section 153A Without Incriminating Material:
The assessee argued that the assessment made under section 153A was invalid as no incriminating material was seized during the search. The Tribunal noted that the original assessment was completed under section 143(3) read with section 153A, and no incriminating material was found during the search. The Tribunal relied on the Gujarat High Court's decision in CIT Vs. Saumya Construction Pvt. Ltd., which held that additions under section 153A can only be made based on incriminating material found during the search. The Tribunal concluded that the assessment order was confined only to the returned income, reiterating the original assessment order, making the revision proceedings under section 263 invalid.

2. Legality of the Revision of Assessment Based on the Tax Evasion Petition (TEP) and Revenue Audit Team's Recommendation:
The Tribunal observed that the revision proceedings were initiated based on the TEP and the Revenue Audit Team's recommendation. The Ld. DCIT and JCIT had reported that the audit objections were not justified, as the findings were based on suspicions rather than conclusive evidence. The Tribunal emphasized that the Principal Commissioner of Income Tax (Pr. CIT) must form an independent opinion rather than relying solely on the audit party's objections. The Tribunal cited the Supreme Court's decision in Sirpur Paper Mill Ltd. Vs. Commissioner of Wealth-tax, which held that the Commissioner should apply his mind independently in judicial matters. Consequently, the Tribunal found the revision proceedings based on the audit report to be legally untenable.

3. Applicability of Explanation 2(a) to Section 263(1) of the Income Tax Act, 1961:
The Tribunal noted that Explanation 2(a) to section 263(1) was inserted with effect from 1-6-2015, while the assessment years involved were 2008-09 to 2010-11. The Tribunal held that the Pr. CIT's invocation of this provision was legally incorrect as it was not applicable to the assessment years in question. The Tribunal concluded that the initiation of revision proceedings under this provision was invalid in law.

Separate Judgments Delivered:
The Tribunal addressed the appeals for the assessment years 2008-09, 2009-10, and 2010-11 separately but followed the same reasoning for each year. The Tribunal quashed the revision orders for all three assessment years, holding that the revision proceedings were not in accordance with the law.

Conclusion:
The Tribunal allowed all the appeals of the assessee, quashing the revision orders passed by the Pr. CIT for the assessment years 2008-09, 2009-10, and 2010-11. The Tribunal emphasized the necessity of independent judgment by the Pr. CIT and the requirement of incriminating material for assessments under section 153A. The Tribunal also highlighted the inapplicability of Explanation 2(a) to section 263(1) for the assessment years in question.