2022 (7) TMI 957 - AT - Income Tax

Revision u/s 263 by CIT - Validity of Reopening of assessment u/s 147 - HELD THAT - We do not justify the remand order to be sustainable particularly when the appeal has been preferred by the assessee against the said order passed by the Ld. AO. We further note that the CIT(A) is yet to decide the order either way and therefore, we do not find any reason to initiate and proceed against the said order passed by the AO u/s 147 taking recourse of the provision of law u/s 263 of the Act by holding the order passed by the Ld. AO erroneous and prejudicial to the interest of Revenue. In our considered opinion, the same is premature. In this regard, we have also considered the judgment passed by the Allahabad High Court in the case of CIT, Meerut vs. Vam Resorts Hotels Pvt. Ltd. 2019 (8) TMI 1418 - ALLAHABAD HIGH COURT as relied upon by the A.R. We find that on the identical situation the Hon ble Court was pleased to quash the order passed under Section 263. During the pendency of the appeal preferred by the assessee u/s 250 while upholding the order passed by the Tribunal in holding the order exercising power under Section 263 was barred by Clause (c) of Explanation 1 of Section 263 . Thus reason/basis of the impugned proceeding u/s 263 of the Act when the appeal preferred by the assessee under Section 250 of the Act before the CIT(A) is pending against the order passed by the Ld. AO under Section 147 of the Act which has been sought to be revised by the Ld. PCIT in the garb of the provision of Clause (c) of Explanation 1 of Section 263 of the Act. The same is, thus, found to be unsustainable and therefore, quashed. Assessee s appeal is, therefore, allowed.

Summary

Issues Involved:
1. Legality of the proceedings initiated under Section 263 of the Income Tax Act, 1961.
2. Validity of the addition made by the Assessing Officer (AO) under Section 143(3) r.w.s. 147 of the Income Tax Act, 1961.
3. Examination of the pending appeal before the First Appellate Authority.

Issue-wise Detailed Analysis:

1. Legality of the Proceedings Initiated Under Section 263 of the Income Tax Act, 1961:

The appeals preferred by the assessee challenge the orders dated 15.02.2022 passed by the Principal Commissioner of Income Tax (Pr. CIT) under Section 263 of the Income Tax Act, 1961. The Pr. CIT initiated proceedings under Section 263 on the grounds that the order passed by the AO under Section 147 was erroneous and prejudicial to the interest of the Revenue. Specifically, the Pr. CIT argued that the AO had not conducted any enquiry into the source of the transactions with M/s. National Shroff, leading to unexplained cash transactions. The Pr. CIT held that the entire amount of Rs. 1,00,000/- received should have been added as unexplained expenses under Section 69A, rather than just 30% of the gross profit.

2. Validity of the Addition Made by the Assessing Officer (AO) Under Section 143(3) r.w.s. 147 of the Income Tax Act, 1961:

The AO had initially added Rs. 30,000/- to the total income of the assessee, considering it as the income from unaccounted and unrecorded business transactions. This was based on the information received from the Investigation Wing, which indicated that the assessee was a beneficiary of bogus billing and under-invoiced sales. Despite notices issued under Sections 133(6) and 148, and subsequent compliance by the assessee, the AO found discrepancies in the transaction details and treated Rs. 1,00,000/- as unaccounted income, adding 30% of the gross profit to the total income.

3. Examination of the Pending Appeal Before the First Appellate Authority:

The assessee contended that the initiation of proceedings under Section 263 was barred since an appeal against the AO's order was already pending before the First Appellate Authority. The Tribunal noted that the AO had examined all relevant aspects and documents submitted by the assessee. The Tribunal relied on the judgment of the Allahabad High Court in CIT, Meerut vs. Vam Resorts & Hotels (P.) Ltd., which stated that the exercise of jurisdiction under Section 263 is barred when an appeal is pending before the Commissioner. The Tribunal found that the Pr. CIT's action was premature and unsustainable, as the appeal before the CIT(A) had not yet been decided.

Conclusion:

The Tribunal concluded that the proceedings under Section 263 initiated by the Pr. CIT were unsustainable and quashed them. The Tribunal held that the AO had already examined the relevant issues, and the pending appeal before the CIT(A) precluded the Pr. CIT from initiating Section 263 proceedings. The appeals filed by the assessee were allowed.

Combined Results:

The appeals for A.Ys. 2012-13 to 2015-16 were allowed, and the orders passed under Section 263 were quashed.

Order Pronounced:

This Order was pronounced in Open Court on 20/07/2022.