2022 (12) TMI 937 - AT - Income Tax

Revision u/s 263 by CIT - treating the order of assessment passed u/s.143(3) r.w.s 153A as erroneous - HELD THAT - The scope of making assessment of total income u/s.153A of the Act in an unabated assessment proceedings is limited and can be only of assessing income that is not disclosed which is detected or which emanates from material found in the course of search of the Assessee, as has been held by M/S. Delhi International Airport Ltd. 2021 (11) TMI 928 - KARNATAKA HIGH COURT In assessee s case the assessment is completed u/s.143(3) r.w.s. 153A and as per the ratio laid down by the Hon ble High Court the scope of making additions by the AO is restricted only to income that is not disclosed which is detected or which emanates from material found in the course of search which are incriminating. The impugned issue of assets written off and the expenditure claimed without TDS for which the PCIT has invoked the revisionary power are not arising out of incriminating material and have already been disclosed in the financials of the assessee. AO therefore could not have made any addition towards the same. We therefore are of the considered view that treating the order of assessment passed u/s.143(3) r.w.s 153A as erroneous on this ground is not tenable and that the PCIT is not correct in invoking the revisionary powers u/s.263. Accordingly the order passed u/s.263 by the PCIT is quashed.

Summary

Issues:
Jurisdiction under section 263 of the Act for non-incriminating issues in unabated assessment years.

Analysis:
The judgment involves three appeals against the order of the Principal Commissioner of Income Tax under section 263 of the Act for the assessment years 2012-13, 2013-14, and 2015-16. The main contention raised was regarding the jurisdiction under section 263 for issues not arising from incriminating material in unabated assessment years. The appellant challenged the revisionary proceedings on both merits and legal grounds, particularly focusing on the jurisdiction of the Principal Commissioner. The additional ground no.2 raised by the appellant questioned the justification of assuming jurisdiction under section 263 for issues not linked to incriminating material found during the search, emphasizing that the order under section 263 was allegedly bad in law based on the facts and circumstances of the case.

The appellant, a company operating casual dining restaurants in India, filed returns of income for the relevant assessment years. Following a search in the premises, the Assessing Officer completed assessments under section 143(3) r.w.s. 153A, accepting the income returned for one year and making additions for inadmissible expenses in the other years. Subsequently, the Principal Commissioner initiated revisionary proceedings based on unverified details related to certain items, leading to a show cause notice and disagreement with the appellant's contentions. The Principal Commissioner set aside the assessment order, considering it erroneous and prejudicial to revenue interests, which the appellant challenged before the Tribunal.

During the proceedings, the appellant argued that the assessment years in question were unabated as assessments had been completed before the search date, limiting the scope of additions under section 153A to undisclosed income related to incriminating material. The appellant cited legal precedents to support the argument that no addition could be made in the absence of incriminating material for unabated assessment years. The Tribunal analyzed the assessment proceedings, emphasizing the distinction between abated and unabated assessments under section 153A and concluded that the issues in question did not arise from incriminating material, making the invocation of revisionary powers under section 263 unjustified.

Ultimately, the Tribunal allowed the additional ground in favor of the appellant, leading to the dismissal of the remaining grounds as academic. The Tribunal quashed the order passed under section 263 by the Principal Commissioner, ruling in favor of the appellant in all three appeals. The judgment was pronounced on December 19, 2022, by the Appellate Tribunal ITAT Bangalore, comprising Shri N.V. Vasudevan, Vice President, and Ms. Padmavathy S, Accountant Member.