2022 (8) TMI 1013 - AT - Income Tax

Revision u/s 263 - reassessment order as erroneous - period of limitation - whether credit entries available in the Bank account of the assessee against the name of the concerns mentioned in the reasons is to be added or not? - HELD THAT - The assessee has explained that she does not have any credit entry against the names of these companies and, therefore, no addition can be made on the basis of her reply. No addition was made. If no addition was made in a reassessment order on the issue for which it was reopened, then any other addition could not be made. This has been propounded unanimously by three Hon ble High Courts, i.e. Hon ble Bombay, Delhi and Gujarat. The Hon ble High Courts were construing the expression and also implied in section 147 to mean that any other income could be added if addition is being made on the item for which assessment was reopened. Therefore, an error under section 263 could be pointed out in the reassessment order on the issue on which it was reopened. If ld. Commissioner was of the view that once the assessment order was reopened then ld. Assessing Officer was required, not only to examine the item for which it was reopened, but any item which exhibits escapement of income and since ld. Assessing Officer failed to examine the other item which in the opinion of ld. Commissioner as escaped income and, therefore, he termed the reassessment order as erroneous is patently contrary to the decision of the Hon ble three High Courts. Thus the reassessment order cannot be termed erroneous for not examination of other issues than the one it was reopened . As far as original assessment order is concerned, i.e. the order dated 28.12.2016 passed under section 153A/143(3), the action under section 263 is time barred in view of the Hon ble Supreme Court decision in the case of CIT vs.- Alagendra Finance Limited 2007 (7) TMI 304 - SUPREME COURT We are of the view that the impugned order is not sustainable. It is quashed. Assessee appeal allowed.

Summary

Issues Involved:
1. Validity of the Principal CIT's cognizance under section 263 of the Income Tax Act.
2. Whether the Principal CIT's order is barred by limitation.
3. Examination of the reassessment order's validity and the original assessment order's status.

Issue-Wise Detailed Analysis:

1. Validity of the Principal CIT's Cognizance under Section 263 of the Income Tax Act:
The assessee challenged the Principal CIT's cognizance under section 263, arguing that the reassessment order dated 26.12.2019 was not erroneous or prejudicial to the interest of the Revenue. The Principal CIT issued a show-cause notice under section 263, indicating that the reassessment order was erroneous because the Assessing Officer (AO) did not verify the transactions involving large inter-bank transfers and exempt income claims. The Tribunal noted that for an order to be revised under section 263, it must be both erroneous and prejudicial to the interest of the Revenue. The Tribunal referred to various judgments, including Malabar Industries and Sun Beam Auto, to emphasize that lack of inquiry by the AO could render an order erroneous. However, if the AO had conducted any inquiry, even if inadequate, it would not justify revision under section 263. The Tribunal concluded that the reassessment order was not erroneous as the AO had examined the bank statements and found no transactions with the mentioned entities.

2. Whether the Principal CIT's Order is Barred by Limitation:
The assessee argued that the Principal CIT's order was time-barred as it was based on the original assessment order dated 28.12.2016, and not the reassessment order dated 26.12.2019. The Tribunal referred to the Supreme Court's decision in CIT vs. Alagendrn Finance Limited, which held that the limitation period for revising an assessment order under section 263 begins from the original assessment order if the reassessment does not cover the same issues. The Tribunal found that the Principal CIT's action was based on issues from the original assessment order, which were not subject to the reassessment. Therefore, the Tribunal concluded that the Principal CIT's order was barred by limitation.

3. Examination of the Reassessment Order's Validity and the Original Assessment Order's Status:
The reassessment was initiated based on information that the assessee was a beneficiary of certain credit entries. The AO reopened the assessment but made no additions after verifying the bank statements. The Principal CIT argued that the AO should have examined the exempt income claims. The Tribunal referred to decisions from various High Courts, including Jet Airways (I) Limited and Ranbaxi Laboratories Limited, which held that if no addition is made on the issue for which the assessment was reopened, then no other additions can be made. The Tribunal found that the reassessment order could not be termed erroneous for not examining other issues. Additionally, the Tribunal noted that any action under section 263 on the original assessment order was time-barred as per the Supreme Court's decision in Alagendrn Finance Limited.

Conclusion:
The Tribunal quashed the Principal CIT's order under section 263, concluding that it was not sustainable as the reassessment order was not erroneous, and any action on the original assessment order was time-barred. The appeal of the assessee was allowed.